The Economy

WTO Rules Against China Over Tire Exports to U.S.

Dec. 13, 2010

U.S. claimed that over four years, tire imports into the U.S. tripled by volume, cutting domestic production by more than a quarter and leading to job losses for 14% of workers in the industry.

Agence France-Presse

The WTO on Dec. 13 rejected China's complaint against punitive U.S. tariffs on Chinese tires, a landmark ruling on safeguards invoked by Washington against disruptive imports from the Asian giant.

President Barack Obama invoked a safeguard clause in the Asian giant's WTO accession agreement to impose punitive duties on imports of Chinese tires over three years. That prompted China to lodge a complaint with the global trade watchdog about the move.

The tire dispute ignited the first trade spat of Obama's presidency, with warnings that a rise in Chinese-made tires had cost more than 5,000 U.S. jobs.

Beijing reacted strongly against the move, obliging the WTO to take up the case in January after negotiations between Beijing and Washington failed to resolve the spat. China had urged the U.S. to withdraw the duties, amounting to 35% in the first year, which it said breached global trade rules.

But the WTO's panel of arbitrators rejected all of China's arguments in the 128-page ruling.

"This is a major victory for the United States and particularly for American workers and businesses," said U.S. Trade Representative Ron Kirk in Washington.

In an rare comment about a trade dispute between member states, WTO Director General Pascal Lamy had expressed concern about the punitive U.S. tariff last year, warning that it that could increase the risk of a protectionist "tit-for-tat spillover."

China's official Xinhua news agency has quoted experts as saying that the tariffs would cost the country's tire industry one billion dollars and wipe out 100,000 Chinese jobs.

A U.S. diplomat claimed that that over four years, tire imports into the United States tripled by volume, cutting domestic production by more than a quarter and leading to job losses for 14% of workers in the industry. Washington claimed the right to impose the duties under a safeguard clause on market disruption which was among the conditions of China's accession to the WTO. It rejected accusations that its move was unfair, unreasonable or protectionist.