Leading industry experts have defended China's auto imports
tariff policy in the wake of a ruling by the World Trade
Organization (WTO) which says the policy breaks its rules.
China considers car parts as a whole vehicle if they account for
60 percent or more of the value of a whole vehicle, and charges a
15 percent higher tariff on them.
Zhao Yumin, a research fellow with the Trade and Economic
Cooperation Institute of the Ministry of Commerce (MOC), told
Xinhua News Agency on Friday that the tax measure is aimed to
prevent tax evasion by companies who import whole cars as spare
parts to avoid higher tariff rates.
"China has completely kept promises the country made when
it joined the WTO by remarkably slashing the import tariff," Zhao
Mei Xinyu, an analyst with the Institute echoed Zhao's
sentiment, adding that "leveling the tariff gap is to publicly
encourage auto smuggling."
The WTO panel, however, largely upheld the complaints filed by
the United States, European Union and Canada that China improperly
taxed imported car parts at the same rate as finished vehicles,
sources close to the case said on Wednesday.
They argued that the Chinese tax measure, which defied its WTO
obligations, deterred auto-makers from using imported parts to
build cars in the country and cost jobs abroad.
It was the first time that China suffered a defeat at the
international trade body. But the decision is only an interim
ruling and China still has the right to appeal.
After informed of the interim result, the Chinese mission to the
world trade body said in a statement issued late Thursday that
"China is carefully studying the report and is preparing to submit
its opinions to the WTO panel.
"China respects the dispute settlement procedures of the WTO and
will not make comments on the case until the final ruling is made,"
the statement also said.
Mei said China should appeal, "even if the result is not what we
wish. However, no panel has changed its findings between an interim
and final decision in WTO history. But it does not mean China
cannot make it happen."
"The root of disputes is high-grade auto parts imports, as the
domestic low-grade auto parts manufacturers can serve the market,"
China's growing appetite for high-grade autos has attracted
foreign auto parts producers. They want to get the cake without
transferring the technology, he added. Lowering the import duty
will be the only way to take more from the market, he said.
Many foreign manufacturers pressured their governments to
influence the WTO to clear the obstacle; the Shanghai-based
China Business News quoted an anonymous MOC official as
According to the latest customs figures, China imported US$10.6
billion worth of auto parts last year, up 17.8 percent year on
Meanwhile, the country's auto parts manufacture industry marked
an industrial output of 670 billion yuan (about US$93.1 billion),
statistics from China Association of Automobile Manufacturers
Market analysts believe that even if the panel's final decision,
which is expected next month, backs up the interim decision, not
much influence would be felt by the domestic auto industry in the
"Only those foreign high-grade auto manufacturers will benefit,"
said Jia Xinguang, a senior analyst with China Auto Consultation
(Xinhua News Agency February 16, 2008)