China to probe 'not revenge' for hefty tire tariff

Just two days after the decision by the United States to levy heavy import tariffs on Chinese tires, the government here has reacted by launching an anti-dumping and anti-subsidies investigation into automotive and chicken exports from the US.

The Ministry of Commerce (MOFCOM) Sunday did not label it as retaliation against the tire dispute, but said it acted simply in a response to domestic concerns.

The probe, which is in line with World Trade Organization (WTO) rules, follows complaints from Chinese manufacturers that US-made products entered the nation's markets with "unfair competition" and harmed domestic industries, said the ministry in a statement.

MOFCOM added it is still opposed to trade protectionism and committed to working towards global economic recovery.

US President Barack Obama's signed a document "to apply an increased duty to all imports of passenger vehicle and light truck tires from China for a period of three years" on Friday, according to the White House.

In addition to the existing duties of 4 percent, tariffs will rise a further 35 percent in the first year, 30 percent in the second and 25 percent in the third. The levy will take effect before Sept 26.

The move was met with anger in China.

Minister of Commerce Chen Deming branded the decision a violation of WTO rules, a grave act of trade protectionism and a breach of the commitment the US made at the Group of 20 (G20) financial summit in London in April.
 
"This is an abuse of special safeguard provisions and sends the wrong signal to the world," he said in a statement on the MOFCOM website. He assured China would do everything in its power to protect the legitimate rights of the tire producers but did not elaborate.

However, in an earlier statement, ministry spokesman Yao Jian said the country would "reserve all legitimate rights, including referring the case to the WTO".

Washington played down the dispute on Saturday, claiming it is simply "enforcing the rules" and did not expect the move to escalate into a trade war.

However, the US could also levy heavier tariffs on other imports from China, such as steel, aluminum and chemical products, according to an industry insider who asked to remain anonymous.

The US Commerce Department on Thursday said it had made a preliminary decision to impose duties ranging from 11 to 31 percent on imports of Chinese steel pipes used for oil and gas wells.

The ruling supports the proposal made by the nation's steel producers led by US Steel Corp, which claimed Chinese imports were granted unfair subsidies.

MOFCOM, however, said the ruling is not in line with the subsidy and anti-subsidy agreements under the WTO framework.

Chinese officials and their US counterparts have been unable to reach an agreement after five months of talks. However, the new tariff is lower than the 55 percent proposed by the US International Trade Commission (ITC) based on a petition led by the United Steelworkers union (USW) that said tire imports had tripled since 2004, causing plant closures and job losses.

MOFCOM spokesman Yao said the move would push the cost onto the consumers, cause US wholesalers and retailers to scramble to find other suppliers, and fail to create new jobs in the US.

"Chinese tire producers pose no direct competition to those in the US," he said before adding that China's tire exports to the US had not witnessed a remarkable increase as claimed by the USW.

Last year, the country's tire exports to the US grew by just 2.2 percent compared to 2007 and, in the first half of this year, fell 16 percent compared to 2008, explained Yao.

"Four US companies have tire production operations in China and account for two-thirds of exports to the US. The tariffs will have a direct impact on them," he said.

Cooper Tire and Rubber Co, a US-based tire maker, warned that higher tariff could disrupt markets.

The company said in a statement it believes in free and fair trade, and that the ITC's proposed remedy "is not appropriate or acceptable and could have significant negative impacts causing considerable market disruption".

The industry insider told China Daily the closure of many US tire factories "is, to some extent, a result of the strategic adjustment of the tire industry", with many tire firms moving production of low-end tires off-shore to make use of cheap labor.

"President Obama's decision is not in the interest of companies seeking higher profit margins," the insider said.

Analysts claim the actions of the Obama administration are at odds with its public statements about how protectionism could deepen the ongoing crisis.

The US and China, the world's two major economic engines, vowed to cooperate in the fight against the world recession but this dispute has caused friction before its top officials meet at a G20 summit in Pittsburgh on Sept 24-25. Obama is also expected to visit China in November.

The tariff change has also sparked debate in the US.

USW's International President Leo Gerard hailed the tariff hike by saying it "sent the message that we expect others to live by the rules, just as we do".

However, Marguerite Trossevin, legal counsel to the American Coalition for Free Trade in Tires, a pro-business group, said: "We are certainly disheartened the president bowed to the USW and disregarded the interests of thousands of other US workers and consumers."

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