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Is China playing around with trade rules to maintain an advantage?

Officials from the US and European Union have been prompted to file a complaint against China with the World Trade Organization (WTO), alleging that the up-and-coming Asian country has been manipulating taxes and tariffs on imported auto parts in an attempt to provide protection for domestic Chinese auto manufacturers.

China was to ramp down its protectionist efforts on auto parts as a condition of joining the WTO, and for the most part, tariffs and taxes on vehicles and auto parts have steadily dropped over the last four years. Tariffs on imported vehicles remain higher than those on components, however, which leads companies such as Cadillac to import "knock-down" kits of components that are then assembled into complete vehicles on the mainland. China claims that such actions are merely efforts to get around the higher tariffs on complete vehicles (well, duh), and is now looking to tax such component kits at the same rate as completed vehicles.

How this whole story will play out - and what effect it will have on foreign companies who do business in China - is yet unknown, but it seems clear that we'll have several years before anything resembling "free" or "fair" trade takes place between China and the West.

[Source: Detroit News]

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