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

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.

Rapid growth in China is helping anchor a world recovery, but the large U.S. trade deficit with the country is blamed by many for high U.S. joblessness, particularly in the manufacturing sector.

The United States has pressed China on broad issues such as the management of its currency, and taken aim at a variety of its more specific trading practices. Just as the Obama administration used a union complaint to slap duties on imported tires, U.S. officials are considering a possible WTO case against policies that labor groups claim are giving China an unfair edge in solar power, electric-car batteries and other technologies in clean energy.

On Monday, leaders of the Senate and the House asked the administration to push in particular on China's lax enforcement of intellectual-property rules, releasing the first of two reports analyzing one of the United States' main trade grievances with China.

Requested by leaders of the Senate Finance Committee and carried out by the U.S. International Trade Commission, the report released Monday cited China for ignoring a number of laws it promised to enforce when it joined the WTO.

Whether apparel copied from brand names without the proper licensing or illegal software, drugs or other more advanced items, "few products are immune from illegal imitation in China," the report concluded.

It noted, for example, an estimated 240,000 Internet cafes operating with pirated software, and inferred from the relatively minuscule payments made to U.S. companies under different copyright and licensing arrangements that abuse was widespread.

Cities such as Shensen and Guangzhou, the report said, had become centers of "organized, large-scale production" of pirated entertainment material, with only loose enforcement by the government. A follow-up report in the spring is supposed to estimate the losses U.S. businesses have suffered as a result.

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