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US tire tariff sends 'wrong signal' to world

(Xinhua)
Updated: 2009-09-13 08:53

China's Minister of Commerce Chen Deming said Saturday the US decision to impose special protectionist tariffs on tire imports from China was grave trade protectionism and sent a wrong signal to the world.

Chen told Xinhua the US government's decision, which was made Friday night, violated related rules, failed to honor its commitment made on the G20 financial summit and was not based on the truth.

"It was a misuse of the special safeguard measures and sent a wrong signal to the world," Chen said, stressing China resolutely opposes the US decision.

The decision came after the US International Trade Commission determined that a surge of Chinese-made tires had disrupted the domestic market and cost thousands of jobs in the US.

The two sides didn't reach an agreement in spite of rounds of negotiations over the case, Chen said.

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According to Los Angeles Times, within 15 days, the US would add a duty of 35 percent in the first year, 30 percent in the second and 25 percent in the third on passenger vehicle and light-truck tires from China.

Chen said China reserves the right to bring the case to the World Trade Organization (WTO) while continuing to take necessary measures to support the tire industry and deal with the negative impact caused by the case.

Fan Rende, president of the China Rubber Industry Association, said the organization has sent a protest letter to US President Barack Obama, calling the decision an "extremely unfair" one as it lacked objective bases.

The association also recommended the Chinese government to resort to the WTO Dispute Settlement Mechanism to handle the case, and appeal to the United States Court of International Trade to protect interests of the related enterprises.

Although President Obama's ruling on the tire case was said to be based on law by the US government, it is seen as a resolution under political pressure at home.

Yao Jian, spokesman of the Ministry of Commerce, said the domestic political pressure pressed the US government to not only impose the tariff and also propose other unreasonable demands involving many industries and push China to adjust fiscal and tax policies.

The US decision was made regardless of opposition from many US organizations.

The US Tire Industry Association, the American Coalition for Free Trade in Tires, the American Automotive Trade Policy Council, and the Retail Industry Leaders Association have all expressed strong opposition after the US International Trade Commission recommended the decision to the US government .

No Good to Anyone

The Ministry of Commerce (MOC) said on its website Saturday that the US lacked bases for the case because tire products exported to the US from China actually declined 16 percent in the first half of this year, compared to the same period last year. China's tire exports to US in 2008 only rose 2.2 percent from 2007.

It said the business situation of the US tire producers has shown no apparent changes after the entry of Chinese products. There exists no direct competition between China's tire products and the US-made ones as China's tires mainly go for the US maintenance market.

Vice Commerce Minister Fu Ziying said in August that the slowdown in the US tire industry is a result of the global downturn, not that of China's increasing tire exports to the US.

China's tire exports to the US tripled between 2004 and 2007 while, during the same period, US tire manufactures doubled profits.

"This means the increase of China's tire exports did not cause any substantial harm to the US tire industry," Fu said.

According to Fan, about 40 percent of the tire output in China is exported, and one third of the exports go to the United States.

The 35 percent tariff means China would not export tires to the US in the first year, which would affect employment of about 100,000 people and result in a loss of $1 billion in export, he said.

He added the tariff would not solve problems faced by the US tire industry, but would hurt interests of enterprises from both countries and hurt trade relationships.

Four US companies have businesses in tire production in China and they account for two thirds of exports to the US, and the tariffs will have a direct impact on these companies, the MOC said.

The increased tariffs would also raise tire prices for US consumers, which would further weaken the government efforts to revitalize the auto industry. Some consumers may even consider postponing replacing old tires, creating concern for safety, according to the MOC.

The move will also produce a chain reaction of trade protectionism and slow the current revival of the world economy, the ministry said in a statement on its website Saturday.

Leaders from around the globe have reached consensus to oppose trade protectionism since the outbreak of the financial crisis. But the tire case, lacking factual bases, is an abuse of protectionist measures. It not only hurts the interests of China, but also those of the US, the ministry said.

The Associated Press reported Saturday many of the nearly two dozen world leaders Obama is hosting at the upcoming G20 summit in Pittsburgh are critical of countries that protect their key industries.

The report said Obama has also spoken out strongly against protectionism and other countries will view his decision on tires as a test of that stance.

According to the MOC, China is the second-largest trading partner with the US and vice versa. China believes the Sino-US economic trade cooperation is significant. The country would not like to see damages to bilateral trade relations caused by protectionism.

Premier Wen Jiabao slashed protectionism at the opening ceremony of the Summer Davos Forum Thursday in Dalian, northeast China, saying it would only slow world economic recovery and ultimately hurt the interests of the businesses and people of all countries.

"We must resist and redress all forms of covert protectionist activities," Wen said, noting as an active participant in economic globalization, China will never engage in trade or investment protectionism.