NEWS RELEASES

September 15, 2006 (9:15 a.m. EDT)
No. 103

CANADA REQUESTS WTO PANEL ON
CHINA’S TREATMENT OF AUTO PARTS

The Honourable David L. Emerson, Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics, today announced that the Government of Canada has requested a World Trade Organization (WTO) panel on China’s treatment of imported auto parts. The United States and the European Union are making similar requests.

“China continues to impose unfair tariffs on auto parts, in breach of its WTO commitments,” said Minister Emerson. “Canada, the United States and the European Union are requesting the establishment of a WTO panel to secure compliance and fair market access for our domestic auto parts producers.”

Under measures implemented by China on April 1, 2005, imported auto parts for use in the assembly of complete vehicles are, in some circumstances, being assessed a higher charge that normally applies to whole vehicles, rather than the tariff listed in China’s WTO tariff schedule as applying to parts. The Government of Canada views this practice as a violation of China’s WTO commitments. On April 13, 2006, Canada requested WTO consultations with China on these measures, as did the United States and the European Union. Those consultations ultimately did not resolve this issue.

The Government will continue to work closely with the other parties involved in finding a resolution to this issue.

Canada is a significant supplier of auto parts to China, which imported an average of $256 million in Canadian auto parts annually from 2003 to 2005.

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A backgrounder is attached.

For further information, media representatives may contact:

Robert Klager

Director of Communications

Office of the Minister of International Trade and Minister for the Pacific Gateway and the Vancouver-Whistler Olympics

613-996-8605

Trade Media Relations Office
Foreign Affairs and International Trade Canada
613-996-2000
http://www.international.gc.ca

Backgrounder

Issue

Current Chinese regulations on auto part imports stipulate that when a car assembled in China is made up of certain combinations of foreign parts, those imported components are assessed at a higher complete automobile tariff rate (typically 25 percent), rather than the tariff regularly applied to auto parts (typically 10 percent).

The Government of Canada believes that this practice creates an additional cost bias in favour of Chinese car part producers—one which contravenes a number of China’s international trade obligations under the WTO.

Canada’s actions

On April 13, 2006, Canada requested consultations with China on that country’s import regime concerning automotive parts. The United States and the European Union made the same request on March 30, 2006. Joint WTO consultations took place on May 11 and 12, 2006, in which Australia, Japan, and Mexico participated as observers. Those consultations ultimately did not resolve this issue.

On July 5, 2006, China announced that it would postpone the implementation of a rule subjecting foreign parts to the complete vehicle tariff if the total price of imported parts amounted to 60 percent or more of the total price of the whole vehicle. Rather than taking effect on July 1, 2006, these criteria have been postponed until July 1, 2008. Other rules that impose higher rates on imported auto parts remain in place.

This change does not address Canada’s concerns about China’s treatment of imported auto parts. Under WTO rules, China is required to eliminate the application of complete vehicle tariffs on individual parts.

On September 15, 2006, Canada, the United States and the European Union requested the establishment of a WTO panel to deal with the matter. This is the first time that Canada is a complainant against China in a WTO dispute.

Next steps

While the Government of Canada requested a WTO panel in its own right, it will continue to work closely with other interested WTO members that have also requested action on this issue.

Any WTO member, including China, may reject a first panel request. A panel will be established at the time of a second request, which could be made at the next Dispute Settlement Body meeting in October. The terms of reference and the composition of the panel will be determined next.

Canada exported $7.1 billion in goods to China in 2005 and imported $29.5 billion worth of goods.

Further information about the WTO dispute settlement process can obtained from the WTO website at http://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm.