September 12, 2009 / 6:36 PM / 8 years ago

China blasts U.S. tire duties as protectionist blow

BEIJING/WASHINGTON (Reuters) - China decried a U.S. decision to impose added duty on Chinese-made tires, saying the move sent a dangerous protectionist signal before a G20 summit and could stoke reactions impeding global recovery.

But the White House played down the dispute, saying it was simply "enforcing the rules of the road" and did not expect the matter to escalate into a trade war.

"We're simply enforcing those rules and we expect the Chinese to understand those rules," White House spokesman Robert Gibbs told reporters on Saturday.

U.S. President Barack Obama slapped the additional duties on tire imports from China on Friday, in what Gibbs said on Friday was meant "to remedy the clear disruption to the U.S. tire industry" from cheap Chinese imports.

China's minister of commerce, Chen Deming, indicated he took this latest trade dispute with Washington especially seriously.

"This is a grave act of trade protectionism," Chen said in a statement put on his ministry's website (www.mofcom.gov.cn) on Saturday.

"Not only does it violate WTO rules, it contravenes commitments the United States government made at the G20 financial summit, and is an abuse of special safeguard provisions that sends the wrong signal to the world."

The tire duty was the first time Washington has applied special "safeguard" provisions Beijing agreed to before joining the World Trade Organization in 2001.

Washington and Beijing have vowed to cooperate in seeking to revive global economic growth. But this dispute brings into focus their continued friction over trade, which could spill into the G20 summit later this month and Obama's scheduled visit to China in November.

Since the financial crisis broke, the G20 gatherings of major rich and developing nations have renounced trade protectionism.

The Chinese Ministry of Commerce spokesman, Yao Jian, said the U.S. move could spark a "chain reaction of trade protectionist measures that could slow the current pace of revival in the world economy", according to the ministry website.

The new duty of 35 percent will take effect on September 26 and adds to an existing 4 percent duty. The extra duty would fall to 30 percent in the second year and 25 percent in the third year.

Those levels are lower than the United States' International Trade Commission recommended, but probably still high enough to deter tire imports from China, if not shut them out completely.

The United Steelworkers union, which represents workers at many U.S. tire-making plants, filed a petition earlier this year seeking the protection. It said a tripling of tire imports from China to about 46 million in 2008 from about 15 million in 2004 had cost more than 5,000 U.S. tire worker jobs.

"For far too long, workers across this country have been victimized by bad trade policies and government inaction," United Steelworkers President Leo Gerard said, welcoming the decision.

PITTSBURGH SUMMIT LOOMS

But the Chinese spokesman Yao accused the Obama administration of acting without sufficient proof and bowing to protectionist forces, spurning Chinese efforts at compromise.

"This step has harmed China, as well as harming U.S. interests, and even more it sends the wrong trade protectionist signal to the world before the Pittsburgh summit," said Yao.

Obama, Chinese President Hu Jintao and other international leaders will meet for the next G20 summit in Pittsburgh on September 24-25. The new tariff kicks in the following day.

China has increasingly turned to domestic demand to shore up growth during the global economic slump.

But for now exports remain a key part of China's economic engine, and its relatively cheap exports to the United States have long faced complaints from U.S. manufacturing groups and unions who say Beijing is unfairly overwhelming competitors.

China warned of protectionist ripples from the dispute.

"Although the world economy has shown some positive developments, the outlook for economic revival remains tortuous, and rampant trade protectionism can only delay the course of recovery," said Yao, the Chinese spokesman.

Fan Rende, the president of the China Rubber Industry Association, said his group will appeal against the U.S. decision and "propose the government needs to adopt mandatory retaliatory measures against U.S. agricultural products and motor vehicles," the China News Service reported.

Fan said the U.S. duties could affect many thousands of Chinese workers. Last year, China exported 46 million tires, worth a total of $2 billion, to the United States, making up a third of total Chinese tire exports, he said.

The commerce minister Chen did not mention any such retaliatory steps, but he said his government "retains the right to further respond and adopt corresponding measures."

Yao said Beijing could complain to the World Trade Organization about the duties.

The U.S. trade deficit with China totaled $103 billion in the first half of 2009, down 13 percent from last year but still a source of much ire in Washington.

In 2008, China's tire exports to the U.S. grew 2.2 percent compared to exports in 2007, and in the first half of 2009 they fell 16 percent compared to the same time in 2008, said Yao.

Additional reporting by Matt Spetalnick; editing by Jerry Norton and Mohammad Zargham

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