China has said it reserves the right to appeal against a World Trade Organization ruling last week that its auto parts import tariff system violates global trade rules.

"China does not fully agree with the content and the conclusion provided by the expert's report group," the Ministry of Commerce said in Beijing yesterday. "According to the WTO dispute resolution procedures, China reserves its right to appeal."

The Geneva-based global trade body ruled last Saturday that China was breaking international rules by requiring the country's auto makers to buy most components from local suppliers or face higher tariffs, the first time China has lost a case since it joined the organization in 2001.

The decision was made in response to a complaint brought by the European Union, the United States and Canada, after China was alledgedly asking Ford, Volkswagen, Renault and other manufacturers on the mainland to use more local components, Bloomberg News said.

The ruling "leaves no doubt that China's discriminatory treatment of US auto parts has no place in the WTO system," US Trade Representative Susan Schwab said in a statement following the ruling.

China can now change its policy or appeal the decision. If the WTO upholds the ruling on appeal, China may face retaliatory tariffs on its exports.

The WTO case was filed in March 2006 as the richest nations began ramping up their criticisms of China's trade policies.

Unfair advantage

US politicians have accused China of using a combination of subsidies, tax incentives and an undervalued currency to give an unfair advantage to domestic companies.

In April 2005, China began a system of levying tariffs on auto parts based on the amount of imports in the complete vehicle. Car makers must register with Chinese authorities and provide detailed information on the quantity and value of foreign parts used in their vehicles. If a threshold of foreign parts is reached, those parts are subject to the 25 percent tariff that applies to complete vehicles instead of the 10 percent tariff applied to parts.

China's Commerce Ministry defended its tariff system, saying it was aimed at stopping tax evasion. "The auto part tariff measures were put in place to prevent attempts to evade tariffs on complete vehicles," it said.

(Shanghai Daily July 23, 2008)