WTO Backs US Tax On Chinese Tyres

The World Trade Organization (WTO) Appellate Body has found in favour of the United States in a dispute brought by China challenging the imposition of additional duties on imports of Chinese tyres.

In September 2009, President Barack Obama imposed additional duties on imports of certain passenger vehicle and light truck tyres from China for a period of three years in the amount of 35% in the first year, 30% in the second year and 25% in the third year.

This safeguard measure was said to have been imposed in order to remedy the US market disruption caused by those imports, as determined by the US International Trade Commission (USITC). It was instituted in response to a petition filed by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers Union under the terms of the Trade Act of 1974.

As a consequence, China alleged that the USITC’s determination regarding market disruption and the level and duration of the additional duties were inconsistent with the Protocol of Accession and the GATT 1994. In addition, China alleged that the US Trade Act’s definition of “significant cause” was inconsistent with the Protocol of Accession.

However, a WTO panel sided with the United States and rejected all of China’s claims in a report circulated in December 2010, finding that the latter acted consistently with its WTO obligations in imposing the additional duties.

China then appealed with respect to the panel’s findings regarding the USITC determination, but, in a judgment published on September 5, the Appellate Body has now also rejected all of China’s claims.

“This is a tremendous victory for the US as well as for American workers and manufacturers,” claimed the United States Trade Representative Ron Kirk. “We have said all along that President Obama’s decision to impose duties on Chinese tyres was fully consistent with our WTO obligations. A WTO panel agreed with us and now the Appellate Body has confirmed it.”

However, China expressed its regret at the Appellate Body’s decision. It has reiterated that the American duties are a punitive protectionist measure that distorts international trade. It was reported that Chinese tyre exports to the US fell by 24% in 2010, and by a further 6% in the first half of this year, while US tyre imports have still risen by 20% and 9% during the same periods.

September 8, 2011

Source: Tax News