WTO establishes panel to rule on whether US tariffs on Chinese tires are legal

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WTO opens probe of US tariffs on Chinese tires

GENEVA — The World Trade Organization opened an investigation Tuesday into U.S. import taxes on Chinese tires, fees Washington says are needed to slow China’s rapid export growth and protect American jobs.

The dispute focuses on a three-year tariff approved in September by President Barack Obama and is the latest in a string of trade battles between the U.S., the world’s biggest importer, and China, the top exporter. The two countries are also arguing over regulations affecting commerce in steel, poultry, patents and Hollywood films.

China told the WTO that the United States had broken a vow it has made with other world powers to avoid protectionism.

At a meeting of trade diplomats, U.S. official Juan Millan expressed Washington’s disappointment in the new case but said the tariffs were fully legal.

“Our measure is consistent with our WTO obligations,” Millan said, justifying the tire charges on a safeguard clause in the agreement that allowed China to join the global trade body in 2001.

“We find it regrettable that China, which has benefited greatly from its exports to the United States, would dispute this safeguard,” Millan added.

China’s exports have surged since joining the WTO, rankling manufacturers in the United States, Europe and elsewhere. Critics of the Asian country say its rise as a trade juggernaut has been aided by unfair policies that boost sales of Chinese goods abroad while limiting the amount of foreign products entering the Chinese market.

The U.S. blocked Beijing’s request last month for a tire probe, but could not do so a second time under WTO rules.

The arbitrators will evaluate whether the U.S. tariffs violate rules governing trade among the WTO’s 153 members. Trade cases often take years to resolve, but can result in the WTO authorizing retaliatory sanctions.

Obama ordered the higher tire tariffs for three years, including a 35 percent additional charge in the first year. It comes on top of a regular 4 percent tariff.

Tires imported from China are usually low-end models. While American-made, name-brand tires can easily run to more than $100 apiece, Chinese imports sometimes sell for half that. The tariffs would make them more expensive.

The U.S. imported about 46 million tires from China in 2008, three times as many as in 2004. In that time, China’s share of the U.S. market went from less than 5 percent to almost 17 percent.

Millan rejected that Washington’s move was “unfair, unreasonable or protectionist.”

Beijing notes that its tire exports to the United States fell by about 15 percent in the first half of 2009, and says two in three tires exported to the U.S. are made by Chinese-foreign joint ventures. This means American companies are also profiting from the trade, it says.