When the World Trade Organization (WTO) issues a ruling in a dispute between two members, one of the biggest questions is whether or not the losing party will comply with it. National trade laws and policies often cannot be changed overnight, and the WTO’s own procedures for enforcing decisions are laborious and slow. Thus, parties can have significant incentives to delay implementation of rulings, or simply fail to do so at all.
China has long maintained high tariffs on auto parts in an effort to protect its own auto industry from import competition. In December of 2008, the WTO ruled, in a clear victory for the United States, that Chinese tariffs were not compliant with the WTO Agreements. Since that time, observers have questioned whether and how China would comply with the WTO's ruling.
It seems they may still be waiting for an answer. On August 28, 2009, Chinese state media announced that the country would drop its auto tariffs. However, only two days later, the very same sources are reporting that China will not drop its tariffs. China’s Ministry of Commerce announced on August 30, 2009, that the earlier reports stemmed from a misunderstanding. The Ministry, in cooperation with other government departments, is expected to issue a joint report on September 1 regarding the compliance measures that China is prepared to take, but tariff reduction is off the table, at least for now.
If the United States, the complaining party in the WTO case, is dissatisfied with China’s compliance measures, it may begin proceedings before the WTO that would permit it to take retaliatory measures, including increased tariffs on sensitive Chinese goods.
The original announcement that China would drop its auto parts tariffs can be found here.
News of the retraction may be viewed here.