China to Probe Alleged ‘Dumping’ of U.S. Products (Update1)

By Bloomberg News

Sept. 14 (Bloomberg) -- China announced a probe into the alleged dumping of American auto and chicken products, two days after U.S. President Barack Obama imposed tariffs on imports of tires from the Asian nation.

Chinese industries have complained that they’re being hurt by “unfair trade practices,” the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is also looking into subsidies for the products, it said. It didn’t specify the imports’ value.

The European Central Bank said last week that rising protectionism may hamper world trade and undermine the global economy’s recovery from recession. The U.S. placed tariffs starting at 35 percent on $1.8 billion of tire imports from China, backing a United Steelworkers union complaint against the second-largest U.S. trading partner.

“While there’s friction, I suspect that the two nations will keep any disputes under control,” said David Cohen, an economist at Action Economics in Singapore. “They understand that they’re increasingly dependent as trading partners.”

Dumping is selling goods for less than the cost of producing them.

China’s commerce ministry said Sept. 12 that it “strongly opposes” the U.S. decision on tires and may refer the case to the World Trade Organization.

‘Retaliatory Spiral’

“A sluggish global recovery and rising unemployment may increasingly tempt governments to adopt restrictive trade policy measures, which could lead to a retaliatory spiral of ever harsher trade restrictions and tensions,” the Frankfurt-based ECB said in its monthly bulletin. A resurgence of trade protectionism would “significantly impair the global recovery process” and reduce growth potential in the long run, it said.

Yesterday’s three-paragraph statement from the Chinese commerce ministry didn’t refer to the tire dispute.

“China has always steadfastly opposed trade protectionism,” the ministry said, adding that the nation was “willing to continue acting in concert with other nations to promote a global economic recovery as soon as possible.”

The dumping and subsidy probes involve “some” auto and chicken imports from the U.S., it said, without specifying which ones.

The U.S. decision in the tire case was a blow to Chinese producers such as GITI Tire Pte Ltd., the largest Chinese tire maker, and U.S. retailers of low-cost imports.

‘Unprecedented Action’

“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 likely won’t spark a trade war, according to White House spokesman Robert Gibbs.

“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.”

Pork, soybean and other farm goods exporters urged Obama Sept. 3 to refrain from imposing tariffs or quotas on imports of tires from China because of the fear of retaliation against U.S. food and agriculture products.

The U.S. consulted with Chinese officials before imposing tariffs to try to work out a solution, a U.S. trade official said, speaking on condition of anonymity. The U.S. hasn’t been notified of the new dumping cases, the official said.

If China is considering the dumping cases in retaliation for the U.S. tires decision, the U.S. could challenge that action at the WTO, the official said. The U.S. prefers holding talks to address the underlying causes of the problem in China, such as subsidies, the official said.

To contact the Bloomberg News staff for this story: Zhang Dingmin in Beijing at Dzhang14@bloomberg.net

Last Updated: September 13, 2009 14:51 EDT