GENEVA – The appellate body of the World Trade Organization issued a ruling Tuesday that a Canadian law exempting import duties only for automobiles made by U.S.-owned automakers violates WTO rules.
The petition was filed by Japan and the European Union.
The ruling, which was delivered to the parties concerned, means Japan and the EU will be entitled to apply sanctions against Canada unless the Canadian government changes its trade law.
The WTO Appellate Body report was scheduled to be made public Wednesday.
According to trade sources, the appellate body, the highest WTO panel in charge of trade arbitration, upheld the ruling issued by a WTO dispute settlement panel that the Canadian measure violates the WTO agreement on most-favored-nation treatment.
Canada levies import duties of about 6 percent on autos imported from Japanese and European automakers. Under the U.S.-Canadian agreement on auto trade, automobiles manufactured by designated U.S. automakers are exempt from Canadian import duties.
The United States and Canada are members of the North American Free Trade Agreement. As a result, only about 15,000 cars manufactured by U.S.-owned automakers a year are affected by the WTO ruling, a Canadian auto industry source said.
Japan welcomes ruling
Japanese automakers Wednesday welcomed a ruling issued Tuesday by the appellate body of the World Trade Organization that a Canadian law exempting import duties only for automobiles made by U.S.-owned automakers violates WTO rules.
A Toyota Motor Corp. official said the company welcomes the ruling.
The Japanese auto industry hopes the Canadian government will extend tax exemption to Japanese and European automakers.
An imposition of tariffs on U.S.-made cars could cast cold water on the Canadian auto market, an official at a major Japanese automaker said.
Canada levies import duties of around 6 percent for autos imported from Japanese and European automakers. Under the U.S.-Canadian agreement on auto trade, automobiles manufactured by designated U.S. automakers are not subject to Canadian import duties.