China ‘Strongly Opposes’ Obama’s Tire Import Tariffs (Update3)

By Bloomberg News

Sept. 12 (Bloomberg) -- China “strongly opposes” U.S. President Barack Obama’s decision to impose tariffs on tire imports from China and may refer the case to the World Trade Organization, the Asian country’s Ministry of Commerce said.

The U.S. violated rules of the WTO and the tariff imposition is a breach of the commitments made by the U.S. 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 U.S. government placed tariffs starting at 35 percent on tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. 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 U.S. 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 tire maker, and U.S. retailers of low-cost imports.

Tire 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 U.S., said in a statement. “This decision will cost many more American jobs than it will create.”

The U.S. duties on Chinese tires 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 U.S. companies have operations in tire production in China and they account for two-thirds of exports to the U.S., and the tariffs will have a direct impact on these companies, China’s commerce ministry said.

Chinese Tire Exports

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

The independent U.S. International Trade Commission recommended that Obama impose duties for three years, starting at 55 percent, to counter a tripling of tire imports from China from 2004 to 2008. The steelworkers union, which represents 15,000 employees at 13 tire plants in the U.S., 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,” U.S. 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 U.S. Chamber of Commerce or with workers.”

“I am happy to say that he came down on the right side,” she said in an e-mailed statement.

AFL-CIO Reaction

AFL-CIO President John Sweeney applauded the decision in a statement today, saying it “sends a strong message that the U.S. government will take the necessary action to ensure that American workers and producers can compete on fair terms in the global economy.”

“This action will bring relief to many workers and their families, and fulfills a longstanding promise that disruptive import surges can and will be countered by effective remedies,” the labor leader said.

Obama is to speak at a convention of the AFL-CIO, the nation’s largest labor federation, next week. He is also hosting Chinese President Hu Jintao and other world leaders at an economic summit in Pittsburgh later this month.

China is the second-largest U.S. trading partner, after Canada.

Since the Steelworkers filed their petition in April, tire imports from China rose as importers raced to beat the imposition of tariffs or quotas. The tariffs Obama imposed are in addition to existing 4 percent duties on all Chinese tires for cars and light trucks.

Chinese Operations

All of the U.S. tire makers have operations in China, according to the ITC, and none of them publicly supported the Steelworkers complaint. Goodyear Tire & Rubber Co., the largest U.S. tiremaker, stayed neutral. Cooper Tire & Rubber Co., the second-largest U.S. tiremaker, opposed the relief. The company has a plant in China.

China’s tire exports are “mainly” supplied to the automobile maintenance market in the U.S., while those made by local producers are supplied to the car producers, China’s commerce ministry said. “They are not in direct competition,” it added.

Chinese officials and a lobbying group for multinational companies such as Caterpillar Inc., Citigroup Inc. and Microsoft Corp. have urged Obama to refrain from curbing imports, saying it could lead to a “downward protectionist spiral.”

Imposing tariffs will have “highly damaging ripple effects throughout the U.S. economy by increasing the cost of imported tires that largely comprise the low-end of the tire market,” the Emergency Committee for American Trade, which represents those companies, wrote in a letter to Obama last month.

Former President George W. Bush turned down each of the four requests for such trade safeguards in other industries, saying they would do more harm than good to the U.S. economy. Obama pledged during the election campaign to take a harder line against Chinese trade barriers, and said he would assess these safeguard cases on their merits.

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Last Updated: September 12, 2009 16:49 EDT