Foreign-made car parts are in a less favourable position, says the WTO

Upholding a complaint from the European Union, Canada and US, the preliminary WTO finding agrees that current Chinese practice is protectionist.

Under existing Chinese rules, its carmakers must use 60% Chinese-made parts - or pay higher taxes.

The ruling says China must end this policy to meet its WTO obligations.

'Less favourable'

"We can confirm that, in all major respects, the panel has agreed with the United States that China has acted inconsistently with its WTO commitments," a US trade official told the Reuters news agency.

The WTO report says that foreign-made car parts are currently in a "less favourable" position than their Chinese-made alternatives.

"The dispute settlement body requests China to bring these inconsistent measures as listed above into conformity with its obligations," says the ruling.

The WTO is now due to make its final report later this year, when the Chinese government will have the opportunity to appeal.

Western complaints

Based in Switzerland, the WTO is tasked with increasing global free trade, and rules on such disputes between countries.

China first joined the organisation in 2001, pledging to open up its domestic market to overseas firms and abide by WTO rules for international trade.

However, Western governments have repeatedly complained that China is not moving quickly enough.

The US announced last year that it was seeking a WTO inquiry over whether Chinese limits on imports of copyrighted US goods broke trade rules.

America has also complained against continuing high levels of music and film piracy in China.

Separately, the EU said earlier this month that it was considering launching WTO action against Chinese restrictions on foreign financial news groups.

China in return has complained about EU limits on Chinese shoe exports.