WTO Rules Against China: Statement by China Business Strategy Consultants

Strategists Emphasize Motivations Beyond Cost Concerns That Should Drive Businesses to Explore China Opportunities

In its first official condemnation of Chinese commercial practices, the World Trade Organization sided with the United States, Canada and the European Union in ruling that China has been unfairly taxing imported car parts at the same rate at which it taxes whole automobiles.

The basis of the compliant is that China's higher taxes on imported car parts give its domestic auto makers incentive to use domestic-made parts, which in turn motivates foreign parts manufacturers to establish operations in China. The United States, Canada and the EU claim these incentives cause lost jobs in their respective countries and say that China promised not to tax car parts as is does whole cars when it joined the WTO in 2001.

Steven Ganster, managing director of Technomic Asia, a consulting firm that helps Western companies develop China business strategies, agrees that China should come into line with its WTO commitments but said cost concerns are not the only reason companies look to China for business opportunities.

"Lower costs are perhaps the first thing many people think of when they think about setting up shop in China," said Ganster, who leads Technomic Asia's U.S. office in Chicago. "Depending on the business, motivations include gaining direct access to local markets, better control of the supply chain and more effective distribution."

Technomic Asia's clients include many Fortune 500 companies and dozens of small and midsize businesses, including many automotive manufacturers and parts suppliers. Ganster and his colleague Kent Kedl, who runs Technomic Asia's Shanghai headquarters, are the co-authors of "The China Ready Company," a book that guides executives through the considerations to be made in developing a strategy for doing business in or with China.

"The WTO and foreign governments need to continue to pressure China to uphold the agreements it made when it joined the organization, but foreign manufacturers shouldn't sit and wait for WTO sanctions to force China to change its tariffs or other practices," Kedl said. "No one knows how long that could take, but it won't be quick. Rather than wait, foreign companies should become more active in China to assess their opportunities and to build an effective supply chain in-country."

About Technomic Asia

Technomic Asia, a division of Tompkins International, is a strategic consultancy with more than 20 years of experience helping clients plan and execute Asian growth strategies. Technomic Asia helps companies enter the Asian market or expand their business by providing critical market insight, an understanding of business potential and assistance in designing the optimum strategy for success. Technomic Asia's Steven Ganster and Kent Kedl are co-authors of "The China Ready Company," a book that details the formation of a successful China strategy. (www.technomicasia.com) (www.chinareadycompany.com)