M. Ulric Killion: The China tires safeguard saga

by M. Ulric Killion

China has termed the US move on tire imports as a serious act of trade protectionism; Photo/China Daily.

The China tires safeguard issue may still be pending final resolution. In Washington, on June 2, 2009, the ITC hearing commences. It is a case filed by the USW Union on April 20, 2009, which alleges that an increase in Chinese tire imports have cost 7,000 US jobs.

In response, the USW wants the Obama Administration to more than halve the number of imports from 46 million units last year to 21 million. The USW also wants the Obama administration to employ section 421 of the Trade Act of 1974, which requires the ultimate approval or rejection of the president even after a ruling of the US International Trade Commission (M. Ulric Killion, ITC rules against China - finds tire import surge (dumping) in US, June 20, 2009, citing Alec Zhu, Sino-US trade ties face a tough tire test, China Daily, June 9, 2009).

A decision by President Obama was due on or before September 17, 2009. On September 11, 2009, President Obama announced his decision, when affirming the earlier decision of the ITC, while also imposing additional duties on tire imports from China. According to the White House, “The new duty will take effect on September 26 and comes in addition to an existing 4 percent duty. It would fall to 30 percent in the second year and 25 percent in the third year” (M. Ulric Killion, Obama slaps duties on tire imports from China, Sept. 13, 2009).

China believes that the measure by the US, which runs counter to relevant WTO rules, is a wrong practice abusing trade remedies,” the Chinese mission to the Geneva-based body said in a statement (M. Ulric Killion, China wants WTO talks on US tariffs, Sept. 15, 2009). China also requested a WTO panel to investigate and rule on the case.

In the interim, China also took steps toward imposing tariffs on American exports of automotive products and chicken meat; a move some characterize as “retaliation for President Obama’s decision late Friday to levy tariffs on tires from China” (M. Ulric Killion, China Moves to Retaliate Against U.S. Tire Tariff, Sept. 15, 2009).

While “China quickly denounced the US move as a serious act of trade protectionism that violates WTO regulations” (China wants WTO talks on US tariffs), there are, of course, others such as some unions such as the USW, some US tire producers, some politicians and others that hail the decisions of both the ITC and Obama administration.

For all of these reasons, the issue of China tire safeguards remains pending. Many anticipate that the present status of the issue and present US resolution may challenge future US trade relations, notwithstanding US credibility at the upcoming G20 meeting. Quoting a recent WTO news release (M. Ulric Killion, G20 governments refrain from extensive use of restrictive measures, but some slippage evident, 14 September 2009):

G20 Governments have refrained from extensive use of restrictive trade and investment measures in recent months but have continued, in a limited way, to apply tariffs and non-tariff instruments that have hindered trade flows, the heads of the OECD, UNCTAD and the WTO indicated in a joint report to G-20 leaders meeting in Pittsburgh later this month.

Secretary General Angel Gurria of OECD, WTO Director-General Pascal Lamy and UNCTAD Secretary General Supachai Panitchpakdi said trade rules and investment agreements have acted as a safety harness preventing the adoption of wide-scale protectionist policies. They welcomed the commitment by governments to continue open trade and investment policies while pointing out that world leaders, particularly those in the G-20, bear responsibility for ensuring that trade and international investment function as tools for economic recovery. The global crisis is not over, they said, and rising unemployment will undoubtedly spark further protectionist pressures in the years to come.

“We welcome the G20 governments’ commitment to maintaining open trade and investment regimes and their ability to withstand domestic protectionist pressures. International rules for trade and investment agreements ... are a source of opportunity in times of economic growth and a restraining influence in times of difficulty. It is in this latter role that the rules are serving us particularly well right now,” they said.

Tariffs, non-tariff measures, subsidies and burdensome administrative procedures regarding imports have been applied in recent months and these actions have acted as “sand in the gears of international trade that may retard the global recovery,” they said.

“It is urgent that governments start planning a coordinated exit strategy that will eliminate these elements as soon as possible,” said the heads of the three organizations.

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For additional readings regarding the China tires safeguard issue, the following articles are available at M. Ulric Killion’s space’s blog.

China wants WTO talks on US tariffs, Sept. 15, 2009.

Obama Must Resist the Anti-Trade Mobs, Sept. 15, 2009.

China Moves to Retaliate Against U.S. Tire Tariff, Sept. 15, 2009.

China files complaint to WTO over US tariffs, Sept. 14, 2009.

Obama's Take on the Tires Tariffs: Enforcing Trade Agreements, Sept. 14, 2009.

China - “Probe 'not revenge' for hefty tire tariff”, Sept. 14, 2009.

China - “Unite against tire tariff hike, exporters urged”, Sept. 14, 2009.

US tire tariff may cost 100,000 jobs in China: industry official, Sept. 13, 2009.

China investigates US auto, chicken imports, Sept. 13, 2009.

China may appeal tire tariff case to WTO, Sept. 13, 2009.