September 15, 2006
No. 103
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.
