The European Commission said it will launch the first ever litigation against China at the World Trade Organization (WTO) by seeking a settlement panel for an auto parts dispute on Friday.

The EU's executive body said it expected the United States and Canada also to request the establishment of a panel on the same issue.

Chong Quan, spokesperson of the Ministry of Commerce, said China has not yet received a formal request from the three parties, which had called on Beijing in March to enter into talks on how to lower barriers to China's US$19 billion auto parts market.

On Friday, they said the time for consultations had run out.

"We have tried again and again to find an acceptable, negotiated solution to this issue; and without Chinese engagement, we have no alternative but to take this course of action," EU Trade Commissioner Peter Mandelson said in a statement.

The EU, the United States and Canada want China - which joined the WTO in 2001 - to change its rules on import tariffs, which they say hinder foreign auto makers and car parts suppliers in China, now one of the world's biggest auto markets.

China considers car parts as a whole vehicle if they account for 60 per cent or more of the value of the final vehicle, and thus charges a higher tariff on them, the Commission has said.

So far, China has been dragged into only one WTO dispute case, which was filed by the United States over semiconductors but did not enter the legislation stage.

In another development, foreign direct investment (FDI) in China dropped by 2.1 percent from a year ago, to US$37.19 billion in the first eight months of this year, according to the latest statistics released by the Ministry of Commerce.

FDI in August alone fell 8.49 percent from last year, to US$4.48 billion.

The ministry did not issue data on contracted foreign direct investment - investment pledged but not yet delivered.

Investment in the financial sectors, including banking, insurance and securities, is not included. Last year, China's financial sectors drew a total investment of over US$10 billion.

(China Daily September 16, 2006)