September 12, 2009 / 1:23 AM / 10 years ago

Obama slaps duties on tire imports from China

WASHINGTON (Reuters) - U.S. President Barack Obama slapped steep additional duties on tire imports from China on Friday in a move that pleased domestic labor groups but drew a strong rebuke from Beijing.

“The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case,” White House spokesman Robert Gibbs said in a statement.

China swiftly denounced the decision.

“China strongly condemns this grave act of trade protectionism by the U.S.,” the spokesman for China’s Ministry of Commerce, Yao Jian, said in a statement issued on the Ministry website (www.mofcom.gov.cn) Saturday.

“This step not only violates the rules of the World Trade Organization, it is also contrary to the relevant commitments that the United States government made at the G20 financial summit.”

The United Steelworkers union, which represents workers at many U.S. tire production plants, filed a petition earlier this year asking for 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.

An additional 35 percent duty will be placed for a year on Chinese-made passenger vehicle and light truck tires, the White House said in a statement.

The new duty will take effect on September 26 and comes in addition to an existing 4 percent duty. It would fall to 30 percent in the second year and 25 percent in the third year, the White House said.

Those levels are lower than the U.S. International Trade Commission had recommended, but likely still high enough to restrict tire imports significantly from China, if not shut them out completely.

“For far too long, workers across this country have been victimized by bad trade policies and government inaction. Today, President Obama made clear that he will enforce America’s trade laws and stand with American workers,” United Steelworkers President Leo Gerard said.

Trade skeptics in Congress also cheered the move.

“Today, the President courageously stood up and enforced fair trade rules that will save jobs and help our communities,” said Senator Sherrod Brown, an Ohio Democrat.

Tires are merely the latest of many Chinese-made products to face U.S. protective restrictions.

Beijing tends to respond to such restrictions by denouncing them and sometimes imposing apparent tit-for-tat measures on U.S. products, without launching broader trade wars. It has also turned increasingly to the World Trade Organization to press its case.

TEST CASE FOR OBAMA

The ITC had recommended starting with a 55 percent tariff that would fall to 45 percent in year two and 35 percent in year three. The steelworkers asked initially for a quota of 21 million that would grow by 5 percent each year.

The steelworkers’ request for import curbs was widely seen as a test case for Obama, who faces pressures to project jobs at home while promoting free trade.

They filed their petition under “Section 421” of U.S. trade law, which allows the United States to restrict imports from China in response to a market-disrupting surge.

China agreed to the “safeguard” measure when it joined the World Trade Organization in 2001. Until Friday, Washington had never used it against Beijing.

Former President George W. Bush rejected four similar petitions that reached his desk and the ITC rejected two other cases before they got that far.

Obama faced a deadline of next Thursday to make his decision in the case.

Analysts expect Friday’s action to encourage other labor groups or domestic manufacturers to seek relief under Section 421, which does not require petitioners to prove unfair trade practices are responsible for a surge in imports.

Chinese tire producers told the Obama administration last month that even an additional single-digit tariff would shut them out of the U.S. market because of low profit margins. They currently supply about 17 percent of the U.S. tire market, although their shipments are down in 2009.

No American tire manufacturer supported the case and one, Cooper Tire, publicly opposed it.

“These tariffs are unwarranted. It’s troubling that the administration would invoke an import surge safeguard over the objections of U.S. industry and in response to falling imports. Not a single U.S. tire company supports these taxes,” said David Spooner, outside counsel for the Chinese tire industry.

U.S. tire wholesalers and retailers also warned a double-digit duty would cause them to cut jobs. They argued that major U.S. tire manufacturers no longer wanted to produce the low-priced tires imported from China.

“We are certainly disheartened that the president bowed to the union and disregarded the interests of thousands of other American workers and consumers,” said Marguerite Trossevin, counsel to the American Coalition for Free Trade in Tires.

Additional reporting by Chris Buckley in Beijing; Editing by Peter Cooney and Doina Chiacu

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