China Programme • Volume 14 • Number 3 • 27th January 2010

WTO Establishes Panel in US-China Tyre Dispute

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The WTO’s Dispute Settlement Body has set up a panel to review the US decision to impose new tariffs on Chinese tyre imports, the organisation announced last week.

The panel was formed in response to China’s second request for WTO dispute settlement procedures, filed 9 December 2009.

The dispute centres on new US tariffs on certain passenger vehicle and light truck tyres from China. The tariffs, which US President Barack Obama announced on 11 September, come on top of Washington’s standard 4 percent duty on tyres. The tariff is set to decrease over the next three years from 35 percent the first year to 25 percent the second, then 20 percent the third, before being eliminated.

Obama’s decision came after the US International Trade Commission (ITC), an independent federal agency responsible for investigating trade complaints, recommended that the US impose three-year duties on Chinese tyres as a safeguard measure.

The terms of China’s 2001 accession to the WTO included a ‘transitional product-specific safeguard’ clause that allows WTO members to protect themselves from import surges caused by China’s entry into the organisation. The clause is set to expire in 2013.

The ITC decision came in response to a request from the United Steel Workers (USW), a Pittsburgh-based labour union, which asserted that imports of Chinese tyres were sufficient to cause ‘market disruption’. USW maintained that Chinese tyre imports had tripled between 2004 and 2008 and caused US production to decline by 25 percent.

China requested consultation procedures three days after the new tariffs were announced, arguing that Washington’s new tariffs are unjustified and inconsistent with Articles I and II of GATT 1994, as well as with US obligations under the terms of China’s WTO accession.

Subsequent consultations did not result in a settlement. The US denied China’s first request for the establishment of a dispute settlement panel. WTO rules dictate that members cannot block a second request, however, so China’s 9 December dispute settlement application was approved.

The tyre tariffs are controversial even within the United States: labour unions are strongly in favour, but some business interests oppose them. Two US Congressmen from the Ways and Means Trade Subcommittee, Kevin Brady and Dan Boren sent a letter to US Trade Representative Ron Kirk on 21 January requesting confirmation that the administration is comprehensively monitoring the effect of the special Chinese tyre tariff on the US economy.

“I am concerned that the administration’s tyre tax will cost us jobs in the United States and raise prices for tyres for hardworking Americans,” Brady stated. “With unemployment hovering at ten percent, we must assess what impact this tax is having on Americans.”

ICTSD reporting; “WTO to probe U.S.-China Tire Rift,” THE WALL STREET JOURNAL, 13 January 2010.