China expressed "regret" on Friday over a complaint the United States and the European Union have jointly filed with the World Trade Organization (WTO) over China's tariffs for car imports.

The two accused China of violating its commitments to the WTO by imposing a discriminatory tariff regime on foreign car parts and whole cars.

They have asked China to take part in discussions about the issue at the WTO in Geneva.

Facts and Figures: China imported vehicles and spare parts worth US$13.6 billion last year. It eliminated an import permit mechanism on vehicles last year. China agreed, when it joined the WTO, to lower tariffs on whole vehicles and spare parts to 25 per cent and 10 per cent respectively by July this year.

"China expresses regret (over their decision)," Commerce Ministry spokesman Chong Quan said in a statement posted on the ministry's website.

"China is earnestly studying the demand for talks by the European Union and the United States," the statement said.

The complaint centres on tariffs for whole vehicles and for imports of spare parts making up 60 per cent or more of the value of a final vehicle.

According to the rules implemented last April, an average tariff of 30 per cent is collected from imported whole vehicles, while the figure for auto parts is 15 per cent.

The European Commission said in a statement on its website that this may contravene China's WTO obligations because to avoid the whole car tariff rate a carmaker has to source at least 40 per cent of its parts in China.

"What the Chinese policy does is favour its domestic industry or force US companies to relocate to China to avoid these illegal taxes," US Trade Representative Rob Portman told local reporters. "We have tried and failed to resolve our differences," he said.

China's rules on auto part imports were introduced to encourage foreign carmakers to produce key parts in China,

But they have lead to complaints mainly from manufacturers of high-end vehicles, such as BMW and Mercedes Benz, which do not currently manufacture parts, such as engines, in China.

China had the right to realize a development target for its domestic industry with policies, said Mei Xinyu, a trade expert with the Chinese Academy of International Trade and Economic Co-operation, a think tank with the commerce ministry.

"Certain regulations meet WTO rules," he said.

He explained that the WTO prohibited obligatory rules about using products made in specific places, or on the proportion of imported products used in the manufacturing process.

According to the WTO regulations, discussions are a procedural step that allows all parties to clarify legal issues and seek a constructive solution.

If both parties cannot reach an agreement during the maximum 60-day consultation period, they have the option of requesting a WTO panel to hear and rule on the dispute.

Such disputes at the WTO usually take two to three years to decide.

China has faced only one such case at the WTO, which was filed by the United States over semiconductors.

(China Daily 04/01/2006 page5)

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