World Trade Organization upholds U.S. tax on Chinese tires

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By Howard Schneider
Washington Post Staff Writer
Tuesday, December 14, 2010; 11:19 AM

The World Trade Organization has upheld the stiff duties that President Obama imposed on car tires imported from China last year, an important victory released on the eve of trade talks between the two countries.

A panel at the Geneva-based trade group on Monday said it agreed that the United States was justified in slapping a 35 percent tax on Chinese tires under WTO provisions that let countries protect local industries and workers from sharp increases in Chinese imports.

The provision was part of the agreement under which China joined the WTO a decade ago. Chinese tire imports to the United States tripled between 2004 and 2008, to 46 million tires worth an estimated $1.7 billion.

Acting on union complaints about lost jobs at U.S. tire manufacturers, the Obama administration imposed a three-year levy on the Chinese products in September 2009, and on Thursday won what supporters say was a significant vindication by the world trade panel.

China's ministry of commerce, in a statement released on its Web site Tuesday, called the U.S. measure "protectionist" and said that China would appeal the ruling.

China had formally protested the U.S. action, arguing that it violated WTO rules. But in a 128-page ruling that delved deeply into the economics of the tire market, the WTO panel found that the administration had presented information "sufficient to support . . . its conclusion that subject imports from China were a 'significant cause' of material injury" to U.S. tiremakers.

Unlike many duties or fees imposed in trade cases, the United States did not have to show that China was competing unfairly or underpricing its products - only that the rapid increase in imports had hurt the domestic industry. The three years of levies are meant to give the U.S. industry time to adjust to the import competition.

The case marks the first time the worker-protection provision has been used. U.S. Trade Representative Ron Kirk called it a "major victory" for U.S. efforts to more rigorously enforce trade agreements.

"We have said all along that our imposition of duties on Chinese tires was fully consistent with our WTO obligations," Kirk said in a statement. "It is significant that the WTO panel has agreed with us."

The United Steelworkers union, which made the original complaint about tire imports, said that U.S. tire production and employment has increased as a result of the duties. U.S. officials said they have not followed up the imposition of the levy with their own research to determine its impact.

China has 60 days to appeal the panel's ruling within the WTO. Chinese officials have complained in other cases that the United States unfairly targets its exports.

Chinese Vice Premier Wang Qishan is in Washington this week for trade talks with U.S. officials, the latest annual meeting of the nearly 30-year-old U.S.-China Joint Commission on Commerce and Trade. Although the session often delves into the details of commercial deals, it is being held this year at a particularly difficult time in what has become perhaps the world's central economic relationship.

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