I was asked today why I haven’t posted on the recent WTO ruling against China on import tariffs for car parts. My lame excuse is, essentially, that I’ve been busy.
The more reasonable excuse is that I want to take a closer look at this case and what’s going on. The basic facts are as follows (from the FT story):
In 2006 the panel began investigating China’s surcharge on imported car parts, imposed if they made up more than a specified portion of a finished vehicle.
The three complainants said the surcharge, equivalent to the tariff on imports of complete cars, exceeded China’s permitted tariff ceiling for car parts and broke WTO rules. The duty on complete cars is typically 25 per cent, compared with about 10 per cent for car parts. Beijing claimed the surcharge was necessary to prevent circumvention of the car duty by importing large chunks of vehicles for local assembly.
I don’t know about you, but two things jump out at me. First, it seems perfectly reasonable that if China can show that exporters are circumventing the auto tariff via bringing in parts and then assembling cars here, then the PRC should be able to impose the higher tariff. Second, I have no idea how the government tracks all of this and then imposes such surcharges. Lots of room for abuse, seems to me.
These cases deserve some reflection, so I’m giving this a couple more days until I can do a little research. You never know what sort of wackiness might be behind some of these trade rules. As one example, here’s my favorite trade rule story in recent days (this is a description of some EU produce standards that I came across):
Consider the Class I cucumber, which must be "practically straight (maximum height of the arc: 10 mm per 10 cm of the length of cucumber)." Translation: A six-inch cucumber cannot bend more than six-tenths of an inch. Following 16 pages of regulations on apples (Class I must be at least 60mm, or 2 1/3 inches, in diameter) come 19 pages of amendments outlining the approved colors for more than 250 kinds.
As for peaches, "to reach a satisfactory degree of ripeness . . . the refractometrix index of the flesh, measured at the middle point of the fruit pulp at the equatorial section must be greater than or equal to 8° Brix."
("Brix is a measurement of the level of sugar in a liquid." — this is all courtesy of the Foreign Policy blog, and is not a joke).