China may approach WTO against Obama's tyre import tariffs

China “strongly opposes” US President Barack Obama’s decision to impose tariffs on tyre imports from China and may refer the case to the World Trade Organization, the Asian country’s Ministry of Commerce said.

The US violated rules of the WTO and the tariff imposition is a breach of the commitments made by the US at the Group of 20 summits, the ministry said in a statement posted on its Web site, citing spokesman Yao Jian. The move will harm both countries’ interests and produce a chain reaction of trade protectionism, slowing world economic recovery, it added.

The US government placed tariffs starting at 35 per cent on tyre imports from China, backing a United Steelworkers union complaint against the second-largest US trading partner, according to a White House statement yesterday. The case brought by the United Steelworkers is the largest so-called safeguard petition filed to protect US producers from increasing imports from China.

“It is an abuse of the trade remedy measures and made an extremely bad start against the backdrop of global financial crisis,” China’s statement said. China will reserve “all legitimate rights, including referring the case to the WTO.”

The decision is a blow to Chinese producers such as GITI Tire Pte Ltd, the largest Chinese tyre maker, and US retailers of low-cost imports.

Tyre production
“By taking this unprecedented action, the Obama administration is now at odds with its own public statements about refraining from increasing tariffs,” Vic DeIorio, executive vice president of GITI Tire in the US, said in a statement. “This decision will cost many more American jobs than it will create.”

The US duties on Chinese tyres likely won’t spark a trade war, White House spokesman Robert Gibbs told reporters in Minneapolis today. Obama is in Minneapolis with Health and Human Services Secretary Kathleen Sebelius drumming up support for his health-care reform efforts.

“For trade to work for everybody it has to be based on fairness and rules,” Gibbs said. “We’re simply enforcing those rules and would expect the Chinese to understand those rules.”

Four US companies have operations in tyre 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, China’s commerce ministry said.

Chinese tyre exports
The US decision of tariff imposition “lacks of support from factual evidence,” according to the ministry. China’s tyre exports to the US fell by 16 per cent in the first half of 2009 from a year earlier, after a gain of 2.2 per cent in the whole of 2008, it said.

The independent US International Trade Commission recommended that Obama impose duties for three years, starting at 55 per cent, to counter a tripling of tyre imports from China from 2004 to 2008. The steelworkers union, which represents 15,000 employees at 13 tyre plants in the US, said cheap imports were forcing factories to close, eliminating jobs.

“These remedies are a necessary response to the harm done to U.S. workers and businesses,” US Trade Representative Ron Kirk said in a statement. “Enforcing trade laws is key to maintaining an open and free trading system.”

Democratic Representative Louise Slaughter of New York said the decision was “the first big test of whether President Obama was going to side with the interest of big corporations and the US Chamber of Commerce or with workers.”