EU, U.S. turn to WTO over China in car parts row

BRUSSELS/WASHINGTON, March 30 William Schomberg and Doug Palmer writing for Reuters reported that the European Union and the United States turned to the World Trade Organization (WTO) on Thursday to pressure China to open its $19 billion auto parts market to more imports.

Brussels and Washington want Beijing to change certain tariff policies they say hinder Western automakers and car parts suppliers in China, now one of the world's biggest auto markets.

"As a mature trading partner, China should be held accountable for its actions and be required to live up to its responsibilities," U.S. Trade Representative Rob Portman said in a statement.

The European Union and United States have long complained about a lack of access in general to China's fast-growing markets as well as piracy and counterfeiting of Western goods.

They have also accused China of unfairly helping its exporters. Brussels is due to start applying anti-dumping tariffs on Chinese leather shoes next week and Washington says China deliberately holds down the value of its yuan currency.

In a coordinated move on Thursday, the EU and United States asked China to participate in WTO consultations on its auto parts tariff rules. Consultations are the first step toward a request for a WTO dispute panel to rule on the issue.

This is the first time the EU's executive Commission has taken China to the WTO since China joined the trade organization in 2001. It is the second case Washington has brought against Beijing.

Carmakers have flocked to China to set up joint ventures to make vehicles, including Ford Motor Co. and General Motors Corp. of the United States and Europe's Peugeot-Citroen, Volkswagen and Fiat.

China considers parts a "whole vehicle" if they account for 60 percent or more of the value of the final vehicle and charges a higher tariff on them, the European Commission said.

The rule appears designed to help Chinese car parts makers, officials in Brussels and Washington say.

"The EU believes that this may contravene China's WTO obligations not to impose obligatory 'local content' rules," the EU said in a statement.

Both Portman and EU Trade Commissioner Peter Mandelson said they still hoped the dispute could be resolved before the WTO formally establishes a panel to hear the case.

But Portman also warned China to expect more WTO complaints if U.S. concerns over piracy and market access barriers can't be resolved through negotiations.

Washington will also be watching to make sure American car companies operating in China aren't punished because Washington decided to pursue the case, he said.

The United States exported $645 million in auto parts to China in 2005, but believes its growth in the market has been impeded by the tariff policy.

U.S. lawmakers, frustrated by Beijing's cheap yuan policy and other practices they blame for a record $202 billion trade gap with China last year, welcomed the WTO challenge.

"I trust it will be the first of many in coming months," said Rep. Benjamin Cardin, a Maryland Democrat.

The previous U.S. WTO case against China involved a Chinese tax rebate on semiconductors. It was resolved during the consultation phase.

China has 10 days to respond to the request and must start consultations within 30 days. If the issue cannot be resolved within a further 60 days, the EU and the United States may request a WTO panel to hear and rule on the dispute.