China to Reduce Tariffs on Cars

China will cut import duties on automobiles and car parts starting next month after the U.S., the European Union and Canada lodged a complaint in March with the World Trade Organization.

China said Thursday that it would reduce the tariffs on auto parts to 10% on July 1. The U.S., the EU and Canada had complained that the duties discriminated against imports, violating WTO commitments China made in 2001 and forcing carmakers such as General Motors Corp. and Volkswagen to source parts from Chinese suppliers.

“This completes our obligations in relation to auto and auto parts as written in our accession agreement to the WTO,” the Chinese Finance Ministry said in a statement.

In April 2005, China began a system of levying tariffs on auto parts based on the amount of imports in the complete vehicle. If the cars are made up of 60% or less in imports, the parts face a maximum duty of 14%. If the auto has more than that, then the parts face -- retroactively -- a duty of about 28%, the tariff of a complete vehicle.

The decision is “a welcome move by China and is in keeping with its WTO obligations,” said Peter Power, a European Commission spokesman in Brussels. “However, the move does not address the issue in our WTO complaint, namely that auto parts should not be subjected to the same high tariffs as new cars. We will continue to press for a solution to this issue.”

Compulsory negotiations between the governments through the WTO have now elapsed, meaning the U.S. or EU may decide to call for the Geneva-based arbiter to rule on the dispute.

China’s imports of U.S.-made auto components rose 13% to $558 million last year, the Chinese commerce ministry said Feb. 16.

China’s vehicle market was worth $19.1 billion in 2004, according to the U.S. The case is only the second filed against China by WTO governments.