China Expresses Regret Over US, EU Action in Auto Parts Dispute

Luis Ramirez
Voice of America
Beijing, China
March 31, 2006

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China says it regrets the United States and European Union's decision to take a dispute over car parts to the World Trade Organization. The U.S. and E.U. accuse China of violating WTO rules by giving its domestic carmakers strong incentives to use a higher amount of Chinese-made parts.

U.S. and European carmakers say the Chinese practice makes their cars less competitive on the Chinese market. This is because the higher the number of Chinese-made parts a car has, the lower the taxes are on a vehicle when it is sold in China.

Chris Murck heads the Beijing office of APCO, a U.S. investors' consulting firm. He says China is trying to prevent foreign domination of its auto industry and wants to give more opportunities to its own smaller, less developed companies.

"From a strategic point of view, China would like to encourage the development of its own auto parts suppliers so that eventually they can hope to have a major domestic, purely domestic, automobile manufacturer [base]. I can understand the objective. I think they're going about it in the wrong way," said Murck.

Washington and Brussels this week said they asked China to take part in consultations on the issue. This is the first step before the World Trade Organization can set up a panel to review the complaint - a process that can take years.

China's Commerce Ministry on Friday issued a brief statement saying it regrets the U.S. and EU action, and says it is studying the matter seriously.

Analysts say they expect China, the United States and the EU to try to resolve the dispute through direct negotiations before the WTO actually takes up the matter.

In the past, Washington has preferred to resolve trade disputes with China without involving the WTO On Thursday, U.S. Trade Representative Rob Portman said he will monitor China's handling of the auto parts case closely. He also said he is considering filing other WTO actions against the Chinese, but did not say what goods would be involved.