Unfair China faces WTO litigation

In the first ever WTO case litigated against China, the United States, European Union and Canada have together planned to lodge a complaint at the World Trade Organization about China's treatment of foreign-made auto parts. The WTO will be asked to set up a panel to investigate whether China has unfairly raised tariffs on imported auto parts.

China is unfairly trying to assist its domestic producers with financial backing, tax regimes and a weak currency, leading to a record surplus in its trade. China’s rapid economic growth is sending shock waves across the global economy.

The Asia nation compels some automakers operating in its land to buy a certain quantity of their components from local suppliers. Those that don't agree must pay more than double the standard import duty on their parts.

A trade action was announced by the U.S. Trade Representative Susan Schwab on Friday which will force China to open its fast-growing market to American-made auto parts.

"It's not appropriate for our exports to be barred from that market, particularly in view of Chinese commitments to the WTO." Said Schwab, noting that a good fraction of the auto parts made in U.S. are exported. “China's current stance leaves us no choice but to file a trade case."

If more than a definite amount of imported auto parts are incorporated in a China-made vehicle, the country imposes a 25 percent duty on the imported parts to favor its domestic producers.

"What they're doing in essence is, if a car produced in China has too many imported parts, then we're going to duty (tax) those parts the same as if it was a whole imported car," said Frank Vargo, the vice president-international affairs for the National Association of Manufacturers.

China will be able to temporarily obstruct the configuration of a hearing panel when the case is taken up on Sept.28 by WTO's dispute settlement body, according to WTO rules. However, the case will be assigned to a panel of WTO judges at the group's next meeting on Oct. 26.

China's $19 billion vehicle market is now the third largest in the world. An annual economic expansion of more than 9.5 percent over the past five years has incited big incomes and expenditure on cars and homes.