US-China Trade Feud Limited

The U.S.-China dispute over tire exports is unlikely to lead to a trade war, experts say.
By Michael Lelyveld

Despite new U.S. tariffs and threats of action by China, there is little chance of a trade war between the two countries, analysts say.

On Sept. 11, President Barack Obama ordered duties of up to 35 percent over three years to counter a surge in China's exports of low-cost tires. The Chinese Ministry of Commerce (MOFCOM) reacted sharply with a statement, charging Washington with "serious commercial protectionism."

On Sept. 13, Beijing launched anti-dumping investigations against imports of auto parts and chicken from the United States in what was widely seen as a retaliatory move. One day later, China filed a formal complaint against the U.S. tariffs with the World Trade Organization.

Potentially, an all-out conflict could affect over $400 billion in bilateral trade, based on 2008 figures from the U.S. Commerce Department. But experts told Radio Free Asia that the result is likely to be no more than a blip, despite the initial alarms.

"My sincere hope and my estimate would be that it's not going to have a serious effect," said Pat Mears, director for international commercial affairs at the National Association of Manufacturers in Washington.

"We'll have some exchanges of words, and there will be a little bit of posturing here, and that's to be expected. But long term, and even short term, I don't expect it to do much," Mears said.

China 'more vulnerable'

One reason that China is unlikely to let tit-for-tat measures get out of hand is that the country enjoyed a $268 billion trade surplus with the United States last year.

"There are still very strong reasons for the United States and China to cooperate," said David Bachman, professor of international studies at the University of Washington in Seattle.

"And if the Chinese want to escalate this, they're likely to be much more vulnerable to escalation than we are, at least on this issue."

While the dispute may not widen dramatically, the two sides are already far apart.

According to MOFCOM, there was no surge in tire exports to disrupt the American market, as the U.S. International Trade Commission (ITC) ruled on June 18.

Last year, China's tire exports to the United States rose only 2.2 percent and actually fell 16 percent in the first half of 2009, spokesman Yao Jian told state media.

But according to the United Steelworkers union, which brought a complaint to the ITC on behalf of U.S. tire workers, China's tire exports jumped 215 percent by volume and 295 percent by value between 2004 and 2008.

The union argued that unfair competition from cheap Chinese tires has cost 5,100 U.S. workers their jobs.

Fan Rande, chairman of the China Rubber Industry Association, told the English-language China Daily that the tariffs could affect 100,000 jobs in China and cost the country's exporters $1 billion in lost sales.

Tariffs 'allowed'

While the disagreements are strong, U.S. experts say there is little doubt that the tariffs are allowed under the bilateral agreement that China signed as a condition of joining the WTO in 2001 to guard the American market from a flood of cheap or subsidized exports.

"The Chinese agreed to the surge protection provisions as part of the bilateral [agreement]," Bachman said. "Probably, by a strict definition, it's protectionist, but it's something they agreed to."

The provisions remain in effect until 2013.

Bachman and Mears agree that China's decision to take the case to the WTO shows Beijing's commitment to work within the system. The global trade body can take two years or more to decide a case, so that the issue will call for patience on both sides rather than rash moves.

But there are questions about whether the U.S. decision on tires may prompt other industries to file petitions seeking similar tariff relief from Chinese imports. A more significant case may be on the horizon regarding steel pipes, Bachman said.

Others have cited possible cases involving Chinese mass-produced goods like glass and cement.

But Mears said the U.S. process is too lengthy and complicated to encourage many other applications.

"I'd be very surprised if this results in a flood of complaints," she said. "There's no one on either side that really wants this to end up in an escalating round of protectionist measures between our two countries."

In a sign that the Obama administration has sought to minimize the political impact of the decision, the president released it on a Friday evening, one day after meeting National People's Congress Standing Committee Chairman Wu Bangguo at the White House.

The tariff announcement came during a 15-day statutory period after it was recommended by the U.S. Trade Representative's office on Sept. 2.


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