Canada joins U.S. and E.U. in trade protest

Canada has joined the United States and the European Union in a formal protest to the World Trade Organization that claims that China bends the rules to keep out foreign-made auto parts.

The complaint was filed Friday in a rare alliance of three major exporters, who usually battle each other across the WTO table.

"China continues to impose unfair tariffs on auto parts, in breach of its WTO commitments," International Trade Minister David Emerson said in a statement Friday. "Canada, the United States and the European Union are requesting the establishment of a WTO panel to secure compliance and fair market access for our domestic auto-parts producers."

He was joined by U.S. Trade Representative Susan Schwab who said the United States and its allies have tried unsuccessfully to negotiate a resolution of the dispute.

"China's current stance leaves us no choice but to file a trade case," Schwab told reporters during a conference call.

In its claim, Canada alleges that China uses differential tariffs to favour Chinese manufacturers over foreign imports. It assesses a tariff of 10 per cent on individual auto parts typical of those made in China, but a tariff of 25 per cent on the partial assemblies that Canada prefers to export.

"The Government of Canada believes that this practice creates an additional cost bias in favour of Chinese car-part producers, one which contravenes a number of China's international trade obligations under the WTO," Emerson said.

Craig Alexander, TD Bank's deputy chief economist, told Canadian Press that the tariffs are only one of several sorepoints between China and the West.

"I'm not surprised this issue has been raised," he said. "I wouldn't be surprised to see different [disputes] in different areas in the future."

China imported an average of $256 million worth of Canadian auto parts annually from 2003 to 2005.

The United States filed its action less than a week before U.S. Treasury Secretary Henry Paulson travels to Beijing to discuss a range of trade matters, from currency issues to banking.