China delays WTO probe into auto parts

GENEVA, Sep 28 (Reuters) China on Thursday exercised its right to delay a World Trade Organisation (WTO) probe into charges by the United States, the European Union and Canada that its tariff policy for auto parts was unfair.

The case, the first involving China to reach litigation, will automatically proceed, however, as soon as Washington, Brussels and Ottawa make a further request.

This could come at the next meeting of the WTO's dispute settlement body on Oct. 26.

The three want China -- which joined the WTO in 2001 -- to change rules on import tariffs that they say hinder foreign auto makers and car parts suppliers in China, now one of the world's biggest auto markets.

China considers car parts as a whole vehicle if they account for 60 percent or more of the value of a final vehicle and charges a 25 percent tariff rather than 10 percent, the EU says.

The rule helps Chinese car parts makers and breaks WTO rules, EU, U.S. and Canadian officials say.

''This dispute goes to fundamental principles of the WTO,'' said the EU's ambassador to the WTO Carlo Trojan. ''The EC (EU Commission) has discussed this matter with China ... but regrettably we have not received any concrete solution.'' In reply, China told the WTO's Dispute Settlement Body (DSB) that the measures were in line with trade rules and were needed to avoid companies trying to import complete cars as auto parts.

Car makers from both sides of the Atlantic have invested heavily in China to set up joint ventures to make vehicles.

Japan, Australia and Mexico have participated in the auto parts talks as interested third parties.

The United States, which ran a record 2 billion trade deficit with China last year, feels the billion auto parts market could play a larger role in narrowing the gap.

The decision to go to the WTO came as the United States, the EU and other countries are pushing China to take measures on other trade issues.

Washington said it could bring more cases against China, ranging from restrictions on foreign investors in financial services to intellectual property abuses and industrial subsidies.

Washington also wants China to reform its currency regime which it says keeps the yuan undervalued to boost exports.

REUTERS PKS RK2041