China delayed a WTO investigation into a complaint made by the US, the EU and Canada over Beijing's tariffs on the import of foreign auto parts, trade officials said yesterday.
The WTO, however, will almost certainly establish an investigative panel to rule on the trade spat at a meeting of its dispute settlement body next month.
Under WTO rules, China was able to block the first request for an investigative panel. The US, the EU and Canada have the chance to make a second request on Oct. 26, at which point the panel will be automatically established.
The investigation could last months and even years before a final judgment on the tariffs, but could eventually result in punitive tariffs being imposed on Beijing.
The dispute marks the first time the Western nations have teamed up to seek a formal WTO investigation over China's trade practices. Their announcement earlier this month to seek litigation came after negotiations with Beijing failed.
Brussels and Washington have said China could be breaking trade rules by applying the same tariff for finished cars to the import of spare parts that make up 60 percent or more of the value of the final vehicle.
This discourages automakers from using imported car parts for the vehicles they assemble in China and creates an incentive for car parts companies to shift production to China, the US and EU said in March when they requested formal consultations with Beijing. Canada later joined the dispute.
China's carmaking market has grown rapidly and it is now second only to the US. However, manufacturers have to source 40 percent of spare parts by value in China to avoid the tax.
Beijing has claimed the tariffs are intended to stop whole cars being imported in large chunks to avoid higher tariff rates for finished cars, but the EU and the US said China had promised not to treat parts as whole cars when it joined the WTO.
European carmakers have between 20 percent and 25 percent of the car production market in China. It values its auto-parts exports to China at about 3 billion euros (US$4 billion).
The US exported US$681 million in auto parts to China last year, an increase of 6.5 percent over 2004. But during the same time, the market for auto parts in China increased by 16.8 percent and the number of passenger cars sold in the country jumped by 27 percent.
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