US Parts Suppliers Happy at WTO Hearing
China joined the World Trade Organisation (WTO) in 2001 and was subsequently given 5 years to alter its current import tax rules on auto parts which sees every imported auto part over a specific threshold taxed at a whopping 25% each.
In 2006 once the 5 year cooling off period had ended a string of complaints against Chinese import taxes arrived on the desk of WTO administrators regarding China’s lack of action over lowering import tariffs, fast forward to 2009 and a hearing over the situation has just been finally heard which per WTO rules China lost. China subsequently appealed by that has also failed. China has been forced to cancel the tax which is the first step in truly opening up the automotive market to WTO rules.
Foreign automotive parts suppliers have been salivating at the thought of entering the worlds biggest auto market but have largely been held back by the tax which has helped domestic Chinese auto parts suppliers flourish in China with their local and international sales. The cancelling of the auto parts import tax will no doubt boost the quality of cars made in China once foreign auto parts suppliers beat the doors down at Chinese car makers.
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Some, if not most of the current Chinese suppliers will die off due to heavy competition from abroad but few surviving ones will try to innovate and improve in order to stay afloat. Maybe the monopoly of Chinese suppliers in China is partly to blame for the current quality of Chinese cars. Competition is a double edged sword.