WTO Panel Upholds US Duties on Chinese Tyres

22 December 2010

A WTO dispute panel last week gave the US a victory over China, ruling that safeguard tariffs levied by Washington on Chinese tyres since 2009 are consistent with multilateral trade rules.

The spat is one in a series of disputes the world's two biggest economies have brought to the global trade arbiter in recent years. The duties of up to 35 percent on car and truck tyres were introduced for a three-year period in September 2009, following a petition by the United Steelworkers union. At the time, Washington's decision incensed the Chinese government and raised questions about the Obama administration's commitment to open trade.

US Trade Representative Ron Kirk called the decision, which was released on 13 December, "a major victory for the US and particularly for American workers and businesses." The United Steelworkers also welcomed the ruling, saying that the duties had created more tyre manufacturing jobs in the US.

China has already announced its intention to appeal the ruling. It has 60 days  to file an appeal.

Washington introduced the duties, worth US$ 1.8 billion, invoking a controversial safeguard clause in China's terms of accession to the WTO. The ‘transitional product-specific safeguard mechanism' was designed to help WTO members shield domestic industries against market disruptions and import surges resulting from Chinese imports. The United Steelworkers had asked for the duties to be imposed, arguing that a threefold increase Chinese tyre imports between 2001 and 2001 had cost 14 percent of US workers in the industry their jobs.

China initiated WTO dispute proceedings only three days after the Obama administration announced the duties, calling the safeguard tariffs harmful to both countries, "trade protectionist and intended to shift domestic political pressure." Beijing had noted that US tyre companies - which, notably, did not support the safeguard duties - had actively decided to shift manufacturing to China.

Meanwhile, observers of US trade policy conjecture that the ruling - and the Obama administration's staunch defence of the safeguard duties - may help smooth the way for the passage of the recently-amended free trade agreement between the US and South Korea.

Reuters reported this week that Washington is believed to be nearing a decision on whether to initiate WTO dispute proceedings against China's export restraints and other policies with regard to rare earth minerals.

ICTSD reporting, "China to appeal WTO tire ruling'," REUTERS, 14 December 2010; "World Trade Organization Upholds American Tariffs on Tires From China," NEW YORK TIMES, 13 December 2010; "US nearing decision on new WTO case versus China," REUTERS, 20 December 2010.

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