WASHINGTON, March 31 (UPI) -- The Chinese government said Friday it regretted a decision by the United States and European Union to file a case at the World Trade Organization over import taxes facing foreign auto part makers.
"China expresses regret at this," said Chong Quan, Commerce Ministry spokesman, in a brief statement on the Ministry's Web site. "China is studying the consultation requests from the European Union and the United States seriously."
The complaint is only the second case brought against China at the WTO since it became a member of the organization in 2001. The United States previously filed a complaint against China on semiconductors, but resolved the issue at the 11th hour before having to proceed with a formal dispute.
However, the timing of the complaint may cause implications for an upcoming state visit by Chinese President Hu Jinato to the United States next month. The Chinese Commerce Ministry will have to make a response within 10 days prior to Hu's arrival in Washington.
"The timing of these exercises ought not to be dictated by political concerns," said Rob Portman, U.S. Trade Representative. "We do not think this is something aggressive but appropriate...The issue has become ripe."
The Bush administration has been under significant pressure to take legal action against the Chinese government over concerns for market access, intellectual property, currency exchange and a burgeoning bilateral trade deficit, which reached close to $202 billion last year.
Earlier this year, the administration indicated during its top-to-bottom review released in February that it would be willing to pursue legal options if it was not receiving sufficient cooperation from its Asian trading partner.
"As a mature trading partner, China should be held accountable for its actions and be required to live up to its responsibilities," said Portman.
The United States argues that China's regulations on imported auto parts violates its multilateral trade obligations. It has previously raised the issued with the Chinese government and has sought repeal of the measure, but has been unable to resolve the issue through talks.
"We hope the filing of our request for consultations will lead to a speedy resolution of this issue," said Portman.
The administration contends that China's use of taxes on imported auto parts end up discouraging domestic automobile manufacturers from using foreign auto parts in the making of Chinese vehicles. The United States exported $645 million of auto parts to China last year. However, the Commerce Department estimates that the Chinese market for auto parts is worth $19.1 billion, something U.S. auto parts makers could access if it wasn't for high tariffs.
China recently put into place a law that imposes a 28 percent tax on imported auto parts, which is equal to the tariff on complete automobiles, if the final vehicle fails to meet certain local content requirements. The United States and EU argue that the law violates China's promise to lower tariffs when it first acceded to the WTO.
The EU initially raised the issue in 2004 with the Chinese government, but Beijing has failed to provide "sufficient reassurances" that the problem would be fixed. With a 20 to 25 percent market in China, the EU is concerned that unfair tariffs hinder the sale of European auto parts.
"Consultations will allow us to clarify the legal issues and find a mutually satisfactory solution," said Peter Mandelson, EU Trade Commissioner. "It remains my strong preference and intention to seek an amicable solution to this issue."
While the U.S. administration has been under growing congressional pressure to toughen its stance on China, Sen. Max Baucus, D-Mont. warned Thursday that the United States was at a critical juncture in U.S.-Sino trade relations.
"We are in a dangerous place in our relationship with China, partly because China does not always play by the rules," said Baucus.
The ranking senator of the Senate Finance Committee introduced legislation with Sen. Charles Grassley, R-Iowa, chairman of the committee earlier this week that would enforce trade rules with all partners including China.
The business community backed the decision by Washington and Brussels to begin consultations with the Chinese.
"This action is important because it follows through on that commitment through an established multilateral process at the WTO, and because it send a signal to China and other trading partners that domestic content measures are not acceptable," said John Castellani of the Business Roundtable.
