SHANGHAI (AFP) — China can expect more tough fights at the WTO after its landmark defeat on car-part tariffs, as countries fed up with its practices will look to the global trade body for help, experts said Thursday.

The case on auto parts was among a growing line of complaints at the World Trade Organisation targeting China, and the victory by the plaintiffs' side could embolden nations to take a tougher action against the trading behemoth.

"The US could become more aggressive," said Andy Xie, an independent economist based in Shanghai. "I think Europe, now with two-way trade in favour of China, could also be more aggressive."

The case is the first time China has been the subject of a complaint that went all the way through to the WTO's Dispute Settlement Body since it joined the organisation in 2001.

Beijing has a minimum local content requirement of 60 percent for home produced cars and if this is exceeded, it then levies the same tariff on the vehicle as it would if it was imported completely built.

China has said the rules aim to prevent tax evasion by companies who import whole cars as spare parts to avoid higher tariff rates.

The plaintiffs, who were backed by WTO judges, argued this measure violates China's WTO accession agreement, which pledged a progressive opening up of its markets.

Canada's Trade Minister David Emerson called the WTO's ruling "a move in the right direction" and hoped it would bring about further change.

"Hopefully it'll bring about a change in the practices that China's been applying."

While the success of the case is unlikely to lead to an avalanche of anti-China WTO filings, analysts said the defeat could serve as a wake-up call for China to re-think some of its trade practices.

"We need to think if policies are in line with the international practice and the acceptance of international society as China is after all a trading giant," said Lan Yisheng a professor with Shanghai University of Finance and Economics.

China, which joined the WTO in 2001, has increasingly become the focus of WTO complaints after keeping a relatively low profile in its first few years, in the organisation, as its booming economy exports goods all over the world.

The tremendous growth has provoked the ire of its major trade partners who accuse China of being a major beneficiary of the global trading system, but failing to abide by its rules.

The United States and the European Union, in particular, point to a yawning trade gap and a currency widely perceived as undervalued as evidence of Chinese duplicity.

The simmering anger led the US to plan to complain to the WTO over tax breaks for Chinese computer chip makers in 2004, but the two sides negotiated a solution four months later without the need for WTO arbitration.

Washington has since filed several other complaints against Beijing with the WTO, including on its failure to adequately protect intellectual property rights in October last year.

Meanwhile, the European Union has said this month that it was considering launching WTO action against China for restrictions on foreign financial news organisations.

For its part however China sees itself as a defender of the WTO system, and such a loss could trigger a backlash at home, said Mei Xinyu, a trade expert with the Ministry of Commerce.

"It could push China to re-examine the rationality of WTO rules as well as our price for joining WTO," said Mei.

China this year lodged its own complaint of its own over what it claimed were unfair US anti-dumping and anti-subsidy investigations into products such as specialist paper, although Mei said they had much to learn.

"Our skills with the WTO rules are far less than those of the US and Europe. But if we keep avoiding solving problems by WTO's dispute settlement mechanism, we are giving our opponents a chance to cheat us," he said.

Feb 14, 2008

Source: afp