WTO publishes trade ruling against China

The verdict--findings of which were obtained by The Associated Press five months ago--found that China was breaking trade rules by taxing imports of auto parts at the same rate as foreign-made finished cars.

In the sweeping decision, the three-member WTO panel ruled against China on nearly every point of contention with the U.S., the 27-nation EU and Canada. The panel found that Chinese measures "accord imported auto parts less favorable treatment than like domestic auto parts" or "subject imported auto parts to an internal charge in excess of that applied to like domestic auto parts."

Its final message to Beijing: "The dispute settlement body requests China to bring these inconsistent measures as listed above into conformity with its obligations."

The three trade powers argued that the tariff was discouraging automakers from using imported car parts for the vehicles they assemble in China. As a result, car parts companies had an incentive to shift production to China, costing Americans, Canadians and Europeans their jobs, they said.

The dispute has likely been closely watched by makers of everything from batteries and brakes to seats and spark plugs on both sides of the Atlantic, including U.S.-based Delphi Corp., General Motors' former parts supplier, and Robert Bosch GmbH in Germany.

China, which can still appeal, claims the tariffs are intended to stop whole cars being imported in large chunks, allowing companies to avoid the higher tariff rates for finished cars. It argues that all measures are fully consistent with WTO rules and do not discriminate against foreign auto parts.

But the U.S. and the EU say that China promised not to treat parts as whole cars when it joined the WTO in 2001.

"In all major respects, the panel has agreed with the United States that China has acted inconsistently with its WTO commitments," the Office of the U.S. Trade Representative said in February.

Some key officials believe the case has ramifications beyond the auto industry.