The WTO ruled against China in a complaint filed by the US, EU and Canada over tariffs on car parts. The “interim ruling” marked the first time a complaint against Beijing reached the WTO’s Dispute Settlement Body. It is also the organization’s first ruling against China since its accession to the WTO in 2001.
China has a minimum local content requirement of 60% for domestically produced cars. When this threshold is exceeded, China then levies the same tariff on the vehicle as for imports of finished cars.
The plaintiffs claimed these tariffs gave Chinese producers an unfair competitive advantage, thus violating the country’s commitment to open markets as a member of the WTO.
China currently faces a number of battles at the WTO. The US still has two complaints in the pipeline – one on piracy and counterfeiting and the other on market access for foreign music, films and books.
More recently, the EU has threatened lodge a new complaint over Chinese restrictions on foreign providers of financial news.
Since the ruling, China has expressed respect for the WTO dispute resolution process, while declining to make comments until after the panel has reached its final decision.
Although the decision against China is only an “interim ruling,” no such panel has ever gone on to reverse its findings.