China files WTO complaint on US tire tariffs
China’s swift challenge to the U.S. decision to slap tariffs on Chinese-made tires has raised concerns over escalating tensions between the trading partners at a crucial time for the world economy.
Beijing lodged a complaint Monday with the World Trade Organization to protest the Obama administration’s Friday announcement that it would levy duties ranging from 25% to 35% over the next three years on Chinese tires for cars and light trucks.
That decision came after the U.S. International Trade Commission determined that a surge of Chinese-made tires had disrupted the domestic market and cost the U.S. thousands of jobs.
Beijing accused Washington of protectionism, which could force the WTO to rule on the issue if the two nations fail to reach an agreement after 60 days of negotiations. One day earlier, China said it would launch anti-dumping investigations into imported U.S. chicken and auto products.
Chinese government and industry officials have sternly criticized the tire tariffs in recent days, saying they would cost 100,000 Chinese jobs and $1 billion in exports.
“The protective measures the U.S. government has implemented . . . [are] an abuse of trade remedy measures,” Yao Jian, a spokesman for the Chinese Ministry of Commerce, said in a statement.
Chinese tires account for about 17% of the U.S. market. Imports have tripled in the last few years to nearly $2 billion in 2008. Still, many analysts doubt that the tariffs, set to take effect Sept. 26, will do much to bolster U.S. manufacturing or save U.S. jobs.
Tire companies that currently import from China could easily outsource production to other low-wage countries. Some models of well-known brands, including Bridgestone, Cooper Goodyear and Michelin, are made in China.
“Most consumers who bought a Michelin tire wouldn’t know if it was made in China or South Carolina, but if they can get one made in China that’s $40 less expensive, as long as it’s the same tread design and passes the same federal safety standards, it’s a good thing for consumers,” said Roy Littlefield, executive vice president of the Tire Industry Assn. “It’s nice to have that option.”
Some tire retailers are furious at the proposed tariffs, which could put new tires out of some consumers’ reach. Mike Bogosyan, owner of Five Star Tires in Hollywood, said most of the tires he sells are made in China. He said many of his customers are on a budget and don’t care where tires are made as long as they’re cheap and safe.
“It’s going to hurt me,” he said of the tariffs. “There’s not 20 to 30 brands that Americans make that I can sell.”
There are signs that the Obama administration’s move will embolden organized labor and domestic manufacturers to push more aggressively for trade sanctions in hard-hit industries. The United Steelworkers union, which represents about half of the nation’s more than 30,000 tire production workers, brought the tire complaint before the International Trade Commission.
Cass Johnson, president of the National Council of Textile Organizations, said his group’s members are “quite pleased” with this administration’s decision to seek sanctions against China. President George W. Bush had rejected all four cases in which the ITC had recommended duties on Chinese goods, including wire hangers and a type of steel pipe.
“A lot of industries, including our own, will look at this option very seriously now,” Johnson said. He mentioned socks and trousers as categories in which domestic manufacturers might file complaints with the trade commission.
Patrick Chovanec, assistant professor at the School of Economics and Management at Tsinghua University in Beijing, said trouble could arise if U.S. industries put the administration in the difficult position of explaining why it would side with one group and not another.
“Can things spin out of control?” Chovanec said. “Yes, they can. . . . What’s going to happen with the next case and the case after that? That’s a greater concern. [President Obama] didn’t position himself to head that off.”
A report released Monday by Global Trade Alert, a London think tank, said governments worldwide were launching more protectionist measures, a potential threat to the global economic recovery.
The Obama administration has rejected the idea that the tire decision represents a rebuke of globalization or a major shift in U.S. trade policy.
“We’re going to have a framework for trade that works throughout the world,” White House spokesman Robert Gibbs said Monday. “I think what would be unnecessary is to take punitive or retaliatory actions for something -- to create a trade problem that doesn’t or didn’t exist.”
Some analysts doubt that the spat between China and the U.S. will escalate into a full-blown trade war -- if only because both nations have so much to lose.
The U.S. is the biggest buyer of Chinese-made goods and a major source of its foreign investment. China is the single largest investor in U.S. treasury securities, and its low-cost manufactured goods have helped keep U.S. inflation in check.
“I think you’ll see both sides backing down pretty quick because the stakes are high,” said Mitch Free, an Atlanta-based global manufacturing and trade specialist. “Politically it looks good for the Obama administration to do this, but ultimately it’s not a long-run strategy; it’s very short term. The Chinese have so much firepower. So much of our manufacturing is outsourced to China that they have the ability to really wreak havoc on the U.S. economy if they so choose. I don’t think either side wants it to escalate.”
Relations between the two nations will be scrutinized this month: Chinese President Hu Jintao is scheduled to meet Obama at the Group of 20 meeting in Pittsburgh on Sept. 24 and 25 to discuss the global economic crisis. An increasingly sour trade environment between the two leading economies could overshadow the event.
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don.lee@latimes.com
andrea.chang@latimes.com
Tommy Yang in The Times’ Beijing bureau contributed to this report.
