Transcript team presentation - International Trade Relations

DS399
U.S. – Measures Affecting
Imports of Certain Passenger
Vehicle and Light Truck Tires
from China
Eric LeMasters, Ryan Liu, Samantha Lohse
History
 April 20, 2009
 Several unions gathered to file a petition to investigate
rapid increases in imports of passenger vehicle and light
truck tires from China
Taken from Wall Street Journal (online.wsj.com) Tire Imports Spur Market-Disruption Case.
History
 April 24, 2009
 ITC began to investigate whether or not this surge was causing
market disruption in the U.S.
 In June of 2009, the ITC concluded that market disruption was
occurring and suggested that the President impose additional
tariffs for three years
 September 26, 2009
 Duties imposed by President Obama on tires from China took
effect
 Tariff rates:
 35% ad valorem 1st year
 30% 2nd year
 25% 3rd year
History
 China requested consultations with the U.S. in
September of 2009 and filed a complaint with the WTO
 China argued that the additional tariffs were inconsistent
with U.S. obligations under China’s Protocol of Accession
 They asserted that the imports were not increasing rapidly
or causing market disruption
 China also stated that the three year period was longer
than needed to remedy the alleged issue
Business and Political Context
 China entered the WTO in 2001
 Upon their entry, Section 421 authorized the President to
impose import surcharges in the case of market disruption
 Previously, six petitions had been filed with the ITC
claiming market disruption, but President Bush chose
not to move forward with import relief
 President Obama was authorized to revisit the tariffs
after six months and decide if they needed to be
modified or eliminated, but he left them as they were
The Main WTO Issue
 Market disruption violation under Section 421 of the
Trade Act of 1974
 Safeguard measures enforced under para. 16 of China’s
Accession Protocol
Section 421 - Trade Act of 1974
 Section 421
 The commission determines if a product from China is
being imported at increased quantities and is causing
market disruption
 If the commission decides market disruption is occurring, it
proposes a remedy
 This authorizes the President to impose safeguards if
market disruption occurs
Safeguard
vs.
China-specific Safeguard
China
Specific,
International
All WTO
Members,
International
China`s
Accession
Protocol
(paragraph 16)
Section 421,
Trade Act of
1974
GATT Article
XIX
WTO
Agreement on
Safeguards
Section 201,
Trade Act of
1974
China
Specific,
U.S.
All WTO
Members,
U.S.
Legality
 PROTOCOL ON THE ACCESSION OF THE PEOPLE'S REPUBLIC
OF CHINA
16. Transitional Product-Specific Safeguard Mechanism
“1. In cases where products of Chinese origin are being imported into the territory of any WTO Member
in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the
domestic producers of like or directly competitive products, the WTO Member so affected may request consultations
with China with a view to seeking a mutually satisfactory solution…”
“4. Market disruption shall exist whenever imports of an article, like or directly competitive with an
article produced by the domestic industry, are increasing rapidly, either absolutely or relatively, so as to be a
significant cause of material injury, or threat of material injury to the domestic industry.”
 TRADE ACT of 1974
Section 421, Action to address market disruption
“(a) PRESIDENTIAL ACTION.—If a product of the People’s Republic of China is being imported into the
United States in such increased quantities or under such conditions as to cause or threaten to cause market
disruption to the domestic producers of a like or directly competitive product, the President shall, in accordance
with the provisions of this section, proclaim increased duties or other import restrictions with respect to such
product, to the extent and for such period as the President considers necessary to prevent or remedy the market
disruption.“
Contested Issues
 China argued that despite the absolute increases in subject imports, a decline in the
rate of increase in the final year of the period of investigation (2008) meant that
subject imports were not “increasing rapidly” in accordance with paragraph 16.4 of
the Protocol.
 China asserted that the United States' “contributes significantly” definition in its
statute was at odds with the ordinary meaning of the “significant cause” standard in
paragraph 16.4 of the Protocol.

China claimed that the USITC failed to properly demonstrate that subject imports
were a “significant cause” of market disruption. China's claim was based on three
principal arguments: (1) a failure by the USITC to show conditions of competition
between subject imports and the domestic product to support a finding of causation;
(2) a failure by the USITC to establish any temporal correlation between rapidly
increasing subject imports and material injury to the domestic industry; and (3) a
failure by the USITC to address alternative causes of material injury to the domestic
industry.
 China claimed that the remedy applied in this case was inconsistent with paragraph
16.3 of the Protocol as it was not limited to the market disruption caused by rapidly
increasing imports; and that, contrary to paragraph 16.6, the three year duration
exceeded the period of time necessary to prevent or remedy the market
disruption.
Panel & Appellate Body
Conclusion
 The United States did not fail to comply with its obligations
under paragraph 16 of the Protocol and Articles I:1 and II:1 of
the GATT 1994.
 The panel also found that there was no “as such” violation in
respect of the US statute implementing the causation
standard of paragraph 16 of the Protocol.
 The Appellate Body upheld all the Panel findings.
Domestic Politics and
China – U.S. Trade Relations
Qui Bono?
Obama: Chinese “flooding us” with cheap tires
Romney: “Protectionism stifles productivity”
United Steel Workers Union: China must “live by the rules”
“This spat about tires and chickens could turn
ugly very quickly” – Eswar Prasad, IMF
2009:
•
China places 36% tariff on certain
nylon imports
•
U.S. imposes duties on steel, paper
and steel products
2010:
•
China places 105% tariff on poultry
from U.S.
2011:
•
China places 21% tariff on certain
American vehicles
•
U.S. launches anti-dumping probe
on Chinese-made solar panels
Did the tariffs actually do anything?
4,500,000
4,000,000
3,500,000
Thousands USD
3,000,000
2,500,000
2,000,000
Tariff enacted
Sept. 2009
1,500,000
Tariff expired
Sept. 2012
1,000,000
500,000
0
2002
2003
2004
2005
2006
2007
2008
2009
2010
Source: International Trade Centre
Harmonized Tariff 4011: Pneumatic Tires, of Rubber
Chinese Imports into the United States
2011
2012
2013
Perhaps, but it didn't help us much...
100%
80%
60%
Canada
40%
China
Germany
20%
Indonesia
Japan
Korea, Republic of
0%
2006
2007
2008
2009
2010
2011
2012
2013
Mexico
Thailand
-20%
-40%
Source: International Trade Centre
Harmonized Tariff 4011: Pneumatic Tires, of Rubber
Imports into the United States, Top 8 Countries
….And everyone came to different conclusions
“By every measure, success has been achieved. Jobs have been retained and
created, production has rebounded, investments in plant and equipment have been
made and many companies have returned to profitability. That's why the law was
enacted, and it worked.”
- Leo Gerard, President, United Steel Workers
"You look at the imports, and imports did not go down. Instead of coming from
China, they came from Korea, Indonesia, Thailand.“
- Roy Littlefield, Executive Vice President, Tire Industry Association
"The tariffs didn't have any material impact on our North American business. The
stuff coming in from China is primarily low end. We got out of that market years
go.“
- Keith Price, Spokesman, Goodyear Tire & Rubber Co.
No comment
- Rubber Manufacturers Association
China & U.S. Trade: Main Drivers
• Actions on both sides seen as largely symbolic
• Chinese nationalism vs. U.S. bravado: Each
makes a convenient political punching bag
• Trade still strong – neither wants to upset the
boat
Questions?