GENEVA (Dec. 13, 2010)— The World Trade Organization has rejected China's petition asking the WTO to condemn U.S. tariffs against passenger and light truck tires imported from China.
“Having carefully considered all the arguments of the parties à we find that the U.S. International Trade Commission did not fail to properly establish that rapidly increasing imports from China were a 'significant cause' of material injury to the domestic (tire) industry,” the WTO said in the conclusion of its final report issued today.
President Obama ordered high tariffs on Chinese tires in September 2009 under Section 421 of the Trade Act, amounting to 39 percent the first year, 34 percent the second and 29 percent the third before reverting to the traditional 4 percent in September 2012.
The United Steelworkers petitioned the Obama administration for Section 421 relief in April 2009, claiming that skyrocketing Chinese tire imports were causing massive layoffs among domestic tire workers. In June, the ITC ruled 4-2 in the USW's favor, and the Office of the U.S. Trade Representative affirmed that decision.
Before the WTO, China argued the ITC failed to establish that Chinese tires were hurting the U.S. tire industry.
Even if the agency had proven the material injury issue, China said, it still imposed a remedy that went far beyond any injury Chinese imports might have caused. And in any case, China said, three years of tariffs was much longer than was necessary to improve any market disruption in the U.S.
However, the WTO dispute panel found China's arguments unconvincing. The U.S. was under no obligation to explain why it thought a three-year tariff necessary, or to distinguish injury caused to the domestic tire industry by U.S. imports as opposed to injury caused by other sources, the panel said.
“The onus is on China to establish prima facie that a three-year measure was excessive,” the panel said. “China has failed to meet this burden.”
Tire retailers and distributors argued against the tariffs before the ITC. Taking action against Chinese imports, they said, would only create shortages in the lower end of the tire supply chain, raise prices and cause layoffs in the tire retailing and distribution sector.
“The only thing surprising about the WTO decision was the speed with which they reached it,” said Paul Fiore, director of government and business relations at the Tire Industry Association. When China first filed its petition earlier this year, Fiore said, the action was expected to outlast the duration of the tariffs themselves.
TIA has consistently asked the Obama administration to review the effects of the tariffs on all aspects of the U.S. tire industry, as the administration is directed to do under Section 421. “TIA still feels we have been left hanging on this issue,” Fiore said. “We will continue to seek other avenues of appeal.”
USW officials could not be reached for comment.