US, China at odds over tire imports

[September 12, 2009]  WASHINGTON (AP) -- President Barack Obama has imposed new punitive tariffs on all car and light truck tires coming into the U.S. from China, a move Beijing condemned Saturday as protectionism and a violation of the guidelines of global trade.

While the White House announcement late Friday is likely to placate union supporters important to the president's health care push at home, it could alienate the strategically important Asian powerhouse and trading partner.

"China strongly opposes this serious act of trade protectionism by the U.S.," a statement posted on China's Ministry of Commerce Web site said. "This act not only violates the rules of the World Trade Organization but also violates the relevant commitments made by the U.S. government at the G-20 financial summit."

Obama's move will harm U.S.-China economic and trade relations, the statement said.

Obama had until Sept. 17 to accept, reject or modify a U.S. International Trade Commission ruling that a rising tide of Chinese tires into the U.S. hurts American producers. The United Steelworkers blames the increase for the loss of thousands of American jobs.

The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties -- an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third, White House press secretary Robert Gibbs said

"The president decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," Gibbs said.

The decision comes as U.S. officials are working with the Chinese and other nations to plan an economic summit of the Group of 20 leading rich and developing nations in Pittsburgh, to be held Sept. 24-25. China will be a major presence at the meeting, and the United States will be eager to show it supports free trade.

Many of the nearly two dozen world leaders Obama is hosting have made strong statements critical of countries that protect their key industries. Obama, too, has spoken out strongly against protectionism, and other countries will view his decision on tires as a test of that stance.

Governments around the world have suggested the United States talks tough against protectionism only when its own industries are not threatened. U.S. rhetoric on free trade also has been questioned because of a "Buy American" provision in the U.S. stimulus package.

The decision could have ramifications in other high-priority areas, too.

The White House badly needs Chinese help to confront climate change, nuclear standoffs with Iran and North Korea and global economic turmoil. China is the world's third-largest economy and a veto-holding member of the United Nations Security Council.

Roy Littlefield, executive vice president of the Tire Industry Association, which opposes the tariff, said it would not save American jobs but only cause tire manufacturers to move production to another country with less strict environmental and safety controls, less active unions and lower costs than the United States.

The steelworkers union brought the original case in April, accusing China of making a recent push to unload more tires ahead of Obama's expected action. The union says more than 5,000 tire workers have lost jobs since 2004, as Chinese tire overwhelmed the U.S. market.

The U.S. trade representative's office said four tire plants closed in 2006 and 2007 and three more are closing this year. During that time, just one new plant opened. U.S. imports of Chinese tires more than tripled from 2004 to 2008 and China's market share in the U.S. went from 4.7 percent of tires purchased in 2004 to 16.7 percent in 2008, the office said.

In a two-page statement China said the tariffs do not square with the facts.

There hasn't been an obvious increase of exports of tires to the U.S., the statement said, citing a 2.2 percent increase in 2008 from 2007, and a 16 percent fall in exports in the first half of 2009 compared with first half of 2008.

The new tariffs, on top of an existing 4 percent tariff on all tire imports, take effect Sept. 26.

For the Chinese government, the tire dispute threatens an economic relationship crucial to China's economic growth. There was speculation before the decision that new tariffs could produce public pressure on Beijing to retaliate, potentially sparking a trade war.

[Associated Press; By JENNIFER LOVEN]

Associated Press writers Foster Klug in Washington and Henry Sanderson in Beijing contributed to this report.

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