The solution proposed by Ivan Horditch is to consider the varying levels of localization across different car models. He suggests introducing a "tolerance period" of 2 to 3 years for new vehicles, allowing time for local supply chains to catch up and meet the required standards. This approach would help ease the transition for automakers while still supporting China's broader goal of increasing domestic production.
Ivan A.F. Hodac, Secretary-General of the European Automobile Industry Association (ACEA), emphasized that arbitration through the World Trade Organization (WTO) should be the last resort. On November 28, he spoke with *First Financial Daily* about ongoing negotiations between China and Europe regarding auto parts trade. He stressed the importance of resolving disputes through dialogue and diplomacy rather than legal action.
ACEA represents 13 major European automakers, collectively producing 16 million cars annually and employing over 1.1 million people. The association recently opened a Beijing office to better advocate for its members' interests in China. Horditch, who has led ACEA since 2001, attended the 2005 Auto Industry Summit hosted by the China Europe International Business School. During his visit, he actively promoted the concerns of European automakers.
The EU's concern stems from China's "Administrative Measures for the Import of Auto Parts That Constitute Vehicle Characteristics," which impose strict rules on how imported components are classified. Under these measures, if certain thresholds are met—such as the value of imported parts reaching 60% of the vehicle’s total price—the items are treated as complete vehicles, subject to higher tariffs and taxes. This has raised alarms among European automakers, especially those operating joint ventures in China.
EU Trade Commissioner Peter Mandelson criticized the policy during the 20th China-EU Economic and Trade Mixed Committee meeting, calling it restrictive. He argued that the measures limit the ability of European automakers to export parts to their Chinese partners, effectively cutting off a key revenue stream. His office also suggested the policy might violate WTO rules, potentially leading to a formal complaint.
Horditch echoed these concerns, stating that European automakers face significant challenges due to the complexity of the import procedures and the uncertainty in pricing. Companies must pay deposits based on unclear classifications, only to later undergo audits to determine the final tax rate. This process is both time-consuming and costly.
He also highlighted that different models require different timelines for localization. New vehicles, for example, may take 2 to 3 years to reach the desired level of local content, as supply chains need time to develop. Horditch urged China to recognize this variability and adjust the "Measures" accordingly.
Analysts like Zhong Shi noted that the policy is based on "origin rules," aiming to boost local production by requiring a minimum 40% value addition. While the intent is to support domestic industry, it has created friction with foreign manufacturers. Zhong believes China may not make major concessions but could simplify some implementation rules or offer temporary relief periods.
At the same forum, Zhang Xiaoyu of the China Automobile Engineering Association stated that the policy is a transitional measure to protect China's auto parts sector. He added that it won’t harm foreign investment or trade, but any fully imported components will be taxed as vehicles. He affirmed that China will follow WTO principles in handling the matter.
In conclusion, while tensions remain, both sides are working toward a diplomatic resolution. The proposed "tolerance period" for new models offers a practical compromise that could ease the burden on European automakers while aligning with China’s long-term goals. (Word count: 598)
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