The fierce competition between China and the United States, the European Union, and Canada, which lasted more than two years for the import of auto parts, had final results on the 15th. On the same day, the World Trade Organization (WTO) made a ruling of final adjudication, which upheld the conclusion that the WTO dispute settlement agency believes that China's practice violates WTO rules. This is the first time China has lost the trade dispute after its accession to the WTO, so its influence has attracted particular attention.
â—†Event
WTO ruled that the import of parts and components was in violation of regulations
The WTO Appellate Body circulated an appeal report on the case of the European Union, the United States, Canada v. China Auto Parts on December 15.
This report maintains the results of the July ruling of the WTO expert group and believes that the measures involved in the case in China violated the national treatment. China lost the case in this trade dispute. However, the Appellate Body’s report overturned the panel’s decision that China’s practice of imposing a tax on a complete set of parts and semi-packaged spare parts in violation of its WTO commitments.
According to the procedure, the judgment report of the Appellate Body will be approved by the WTO Dispute Settlement Body and come into force within 30 days. After the verdict comes into effect, China must amend the non-compliance measures within a certain period of time. This period will be determined through consultation between the parties or arbitration by the WTO.
The auto parts dispute has continued for more than two years. When China, the United States, the European Union, and Canada negotiated on the dispute but failed to reach an agreement, on October 26, 2006, the WTO Dispute Settlement Body established an expert group to examine the case. On July 18 this year, the expert group announced the ruling that China violated relevant trade rules. On September 15, China filed an appeal.
>>Department of Commerce
Welcome + regret
Yao Jian, spokesperson of the Ministry of Commerce, said yesterday that the WTO Appellate Body’s appeal for Chinese appeals in respect of imported auto parts/half set parts import tariff treatment has corrected the Group’s previous erroneous rulings. China welcomes this, but at the same time The Appellate Body regrets that the other parts of the Panel have been upheld.
Prior to this, officials of the Ministry of Commerce had stated that China's regulations for the import of auto parts and components were designed to prevent lawbreakers from using the tax difference between vehicles and parts to avoid customs supervision. Since its accession to the WTO, China has been earnestly fulfilling its commitments. It has greatly reduced the tariffs on auto and auto parts and provided trading partners with unprecedented access to the automotive and auto parts market.
>>Background
The origin of disputes in the motor trade
The dispute over the auto trade was attributed to the "Administrative Measures for the Import of Auto Parts That Constitute the Characteristics of the Vehicles" issued by China in 2005. The "Measures" imposes strict restrictions on the import of wholly-in-part or semi-part-assembled automobiles. It states that if the sum of the prices of imported parts reaches 60% or more of the total vehicle price of the vehicle, the same tariff as the entire vehicle shall be levied ( 25%). Correspondingly, for the import of parts and components, China's tariff rate is only 10%.
The EU and the United States believe that China’s auto parts import mechanism violates the WTO rules, and formally submitted a consultation request to China at the WTO in March 2006. Subsequently, Canada joined the ranks.
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>> Why formulate parts import measures?
Preventing the whole disguised form of tax evasion
Zhao Yumin, director of the International Market Research Department of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce: The original intention of China's relevant regulations is to prevent the smuggling of high-end cars and eliminate the practice of some people importing auto parts with low tariff levels and then assembling them into vehicle sales. . At the same time, due to foreign auto companies blocking high-end auto parts technology in China, this initiative can also objectively promote foreign companies to establish production lines in China or joint ventures with domestic enterprises. Some developing countries have similar practices in importing auto parts, but they have not attracted much attention from European and American countries. Because China has a strong ability to digest technology, foreign companies are worried that once they establish a production line in China, it will cause technological leakage, and it will strongly resist the practice of our country.
>> The pros and cons of the final verdict?
Although losing the case, it is advantageous than the preliminary results
Zheng Zhihai, president of the WTO Research Association of the Ministry of Commerce: This case was the first time that China filed an appeal against the ruling of the WTO. Although the appeal was lost, the final ruling was more favorable to China than the ruling of the WTO expert group in July this year.
China has not made any relevant commitments when it entered the WTO, so the cancellation of the WTO ruling by the WTO expert group that China violated its WTO commitments is in accordance with the facts. However, the conclusion of the final ruling on China’s violation of WTO’s national treatment principles also shows that some of the measures taken by China in the internal circulation area still have significant differences with international practices. In the face of this final ruling, China must make corrections to related measures. At present, the relevant experts of the Ministry of Commerce are stepping up to discuss the details of the amendment.
>> What did the losing case teach us?
Skills to use WTO provisions need to be improved
Mei Xinyu, deputy researcher of China's Foreign Trade Research Department, Institute of International Trade and Economic Cooperation, Ministry of Commerce: Many specific rules of the WTO itself are biased. Our young and not-so-familiar WTO members are also more skilled at exercising WTO terms than European and American countries. There is a lot of difference, so it is not surprising that we eventually lose the case. However, even if we eventually lose the lawsuit due to the unfamiliarity with the use of relevant laws, the litigation process of several years has been enough to make many domestic auto parts manufacturers grow.
Since the final ruling has been made, for our domestic auto parts companies, the only thing to do is to improve their competitiveness and strive to occupy domestic and foreign market share.
â—†Impact
Will not have much impact on domestic car prices
Zhang Xiaoyu, vice president of the China Federation of Machinery Industry, said that even if the original policy is cancelled after losing the lawsuit, it will not have a major impact on domestic auto makers. At present, domestic auto makers have more localization, and most companies that are domestically produced are With the introduction of technology, it can also reach 40% localization requirements. It will only affect a very small number of luxury car manufacturers and will not affect the general automobile companies.
If the tariff is reduced, it will be beneficial to the operation of these luxury car companies, but these companies are also strengthening the localization rate, and will not blindly import parts to the domestic assembly.
According to Qiu Gengen, deputy director of the Beijing WTO Affairs Center, China has lost the appeal to the WTO, so it may be necessary to accept some changes in the parts import policy. However, China's policy is based on the situation in the country. It is based on the fact that in order to combat foreign companies' tax evasion in disguise, if they are revised, they will allow multinationals to take advantage of the loopholes.
Parts industry may suffer damage
Dong Jianhua, an analyst at Southwest Securities, said that it is possible for the government department to cancel or amend the policy. Other restrictions may also be introduced to restrict the assembly of imported luxury parts by luxury car companies.
Because if you allow a luxury car company to import spare parts for assembly in the country, it will cause damage to the domestic parts industry, especially luxury cars. After the localization of luxury cars is basically impossible, the Chinese joint venture will become a company selling light cars. Not to promote the development of the parts industry.
Tung Chee Hwa believes that the cancellation of the original parts import management policy is not a good thing for joint ventures. As parts are changed into imports, the increase in car prices will further affect demand and it will not be a good thing for consumers.
Luxury car companies such as Mercedes-Benz and BMW have had relatively short time to establish factories in China and have not done a good job in their local facilities. The quality certification in China has not yet been fully established. Therefore, it is certain that they wish to import spare parts directly from abroad. This is also in line with these car companies. The interests of the host country promote their employment. However, if this is done, China’s employment opportunities and local GDP will be reduced.
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â—† car prices
BMW Brilliance: Over 40% localization rate in China
According to a person from the BMW Brilliance Public Relations Department yesterday, the 3 Series and 5 Series models produced by BMW Brilliance in China have already reached a localization rate of more than 40%. BMW Brilliance has been levied a 10% tariff on imported parts. Instead of imposing a 25% tariff on imported vehicles, the loss of this case has had little impact on BMW Brilliance. BMW Brilliance will follow domestic automobile laws and regulations and will continue to deepen the localization process and increase the localization rate. Compared with imported components, increasing local procurement can enhance the competitiveness of enterprises and reduce costs.
Daimler: Mercedes-Benz localization in implementation
Mercedes-Benz at Hua Nianjia, a senior executive of Daimler Northeast Asia Investment Co., Ltd., responded yesterday that Mercedes-Benz has been committed to increasing the localization rate. The fundamental reason is to reduce costs. Mercedes-Benz is expected to reach 40% localization rate after half a year. This plan is being steadily implemented and it is only a matter of time. As Mercedes-Benz is starting late compared to other luxury car manufacturers in the country, it is difficult to find parts suppliers.
However, the senior executive also stated that localization is not an overnight event. Due to the small size of luxury cars, it is difficult to reach tens of thousands or even hundreds of thousands of vehicles. Suppliers will find it costly to open a set of molds for a certain part. Not worthwhile. In addition, important core technologies also involve intellectual property issues. Mercedes-Benz's original suppliers in Germany were not willing to transfer technology to China because the transfer meant training competitors. A car involves tens of thousands of parts and components. It takes a project to negotiate, negotiate, and implement it. It is a big project.
â—† industry voice
Lowering tariffs does not mean increasing the advantages
Zhongshi, an analyst in the automotive industry, stated that the losing case was all expected. When the last WTO expert group ruled that the Chinese auto parts import management measures were in violation of regulations, the matter was a foregone conclusion.
Although a small number of companies producing joint venture high-end models have small production scale and small output, although they may benefit, localization has become a trend today. Lowering tariffs does not mean that their competitive advantage will increase.
Pre-lost car companies have been subject to policy care
Jia Xinguang, an analyst in the automobile industry, said that on the surface, the 25% customs duty imposed on some companies will be reduced. However, the Ministry of Commerce previously stated that these car companies have been taken care of and enjoyed certain favorable conditions. .
In fact, at that time, the intention of implementing the "Administrative Measures for the Import of Auto Parts That Constitute the Characteristics of Complete Vehicles" was to curb tax evasion and tax evasion by some domestic small companies without formal production equipment and private parts assembly, but in the end they evolved into "use of homes." Law became an international lawsuit."
â—† Major Events in the Automobile Trade Dispute
☆2006
On March 30, the EU and the United States jointly lodged a complaint with the WTO on China's auto parts import policy.
On September 16, the Office of the U.S. Trade Negotiations Representative issued an announcement saying that Europe, the United States, and Canada have jointly submitted an application to the WTO and they hope to establish an "expert group" related to this. The spokesman of the Ministry of Commerce immediately expressed regret.
On September 28, the WTO held a dispute resolution agency meeting, which meant that the WTO dispute settlement procedure formally entered the start-up phase, but China rejected the request for the establishment of an expert group.
On October 26, the WTO Dispute Settlement Body requested the EU, the United States, and Canada to re-declare an expert panel to handle the case.
☆2008
On February 13, the WTO ruled for the first time that China violated the trade rules, saying that China imposes large tariffs on imported auto parts, and that this action violates China’s commitment to join the WTO in 2001.
On July 18, the expert group announced the ruling report and believed that the Chinese practice violated WTO rules.
On September 15, China appealed to the WTO appealing agency.
On December 15, the WTO Appellate Body made a ruling of final adjudication, which upheld the conclusion that the dispute settlement agency believed that China’s practices violated WTO rules. China lost the lawsuit in this trade dispute.
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