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China may appeal tire tariff case to WTO

By Si Tingting (Chinadaily.com.cn)
Updated: 2009-09-13 10:23

China "strongly opposes" US President Barack Obama's decision to introduce punitive tariffs on tire imports from China and may refer the case to the World Trade Organization, the Ministry of Commerce (MOFCOM) said Saturday.

The imposition of the new tariffs not only violated rules of the WTO but also runs against the commitments made by the US at the Group of 20 summits, the ministry said in a statement posted on its website on Saturday, citing spokesman Yao Jian. The move will harm both countries' interests and could trigger a damaging chain reaction of trade protectionism, slowing world economic recovery, it added. China will reserve "all legitimate rights, including referring the case to the WTO."

President Obama "signed a determination to apply an increased duty to all imports of passenger vehicle and light truck tires from China for a period of three years," the White House said in a statement on Friday.

In addition to the existing duties of four percent, tariffs will surge by a further 35 percent in the first year, 30 percent in the second and 25 percent in the third. The tariffs will take effect in any day before Sept 26.

Likewise, US may start levying heavier tariffs on other imports from China, such as steel, aluminum and chemical products, according to an industry insider who prefers to speak on anonymity.

For the past five months, MOFCOM and other related ministries had hold many high-level talks with their US counterparts, but the two sides failed to reach an agreement. However, the newly announced tariff rates are lower than the proposed 55 percent.

The United States International Trade Commission (ITC) had proposed tariffs of up to 55 percent on Chinese passenger and light truck tires, based on a petition led by the United Steelworkers Union (USW) that said tire imports had tripled since 2004, bring plants to closure and forcing people out of employment. USW represents workers at major US tire manufacturers.

MOFCOM said in the statement that the curb would only boost costs for consumer, cause US wholesalers and retailer to scramble to find other suppliers and not create any new tire-manufacturing jobs in the US.

"Actually Chinese tire producers poses no direct competition to those produced in the US," the MOFCOM's statement said. China's tire exports are "mainly" supplied to the automobile maintenance market in the US, while those made by local producers are supplied to the car producers, it said.

Four US companies have operations in tire production in China and they account for two-thirds of exports to the US, and the tariffs will have a direct impact on these companies, MOFCOM said.

Cooper Tire & Rubber Co, an Ohio-based tire producer, said earlier that the punishment is not appropriate and warning it could disrupt markets.

"Whatever the outcome, Cooper will fully cooperate with the government's final decision," the Findlay, Ohio, tire maker said in a statement. But Cooper said it believes in free and fair trade, and that in its opinion, the ITC's proposed remedy "is not appropriate or acceptable, and could have significant negative impacts causing considerable market disruption."

"The closure of many tire factories in the US is, to some extent, a result of the strategic adjustment of US' tire industry," said the insider.

According to him, many US tire producers had moved their production of low-end tires off-shore to make use of cheap labor, while keeping the high-end production line in US. "President Obama's decision is not in the interest of these companies for seeking higher profit margin," he said.

By taking this unprecedented action, the Obama administration is now at odds with its own public statements about how protectionism could deepen the ongoing crisis. His decision comes ahead of the G20 summit in the US city of Pittsburgh on Sept 24-25, when he will host Chinese President Hu Jintao.

President Obama's decision also sparked disputes in the US.

"For far too long, workers across this country have been victimized by bad trade policies and government inaction." United Stealworkers' International President Leo Gerard said in a statement. "The president sent the message that we expect others to live by the rules, just as we do."

But the American Coalition for Free Trade in Tires, a pro-business group, expressed disappointment in Obama's decision.

"We are certainly disheartened that the president bowed to the union and disregarded the interests of the thousands of other American workers and consumers," said Marguerite Trossevin, legal counsel to the coalition.

(Agencies contributed to the story.)