| 19-02-2008 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 break
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 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 realized promises the country made when it joined the WTO by remarkably
slashing the import tariff," Zhao said. 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," Zhao said. 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 saying Friday. According
to the latest customs figures, China imported $10.6 billion worth of auto parts
last year, up 17.8 percent year on year. Meanwhile,
the country's auto parts manufacture industry marked an industrial output of 670
billion yuan ($93.1 billion), statistics from China Association of Automobile
Manufacturers showed. 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 long term. "Only
those foreign high-grade auto manufacturers will benefit, " said Jia Xinguang,
a senior analyst with China Auto Consultation Co Ltd.
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