U.S. Trade Policy and Relations

1. U.S. Trade Policy and Relations U.S.-Tires China "Bad Policy and Right Message" -Robert Samuelson

2. Agenda • Background: History & Context of the Case • Main WTO Issue • Application of U.S. law • Specific WTO agreement/provisions involved • Contested national act consistent w/ WTO obligations? • Complaint Position: China makes its case • Respondent Position: US defends its action • Panel Decision • Appellate Body Position • Implementation: the "Real World" results • Team's ideas and observations • Class Q&A

3. Source: Dave Granlund (davegrandlund.com)

4. History and Context • Obama reinstating Smoot-Hawley? • G-20 pledge: "Refrain from raising new barriers to...trade in goods..." • US political dynamics: Financial Crisis, NAFTA, Chinese Currency, Buy America Act  • Safeguards signaling: Assuage Congress

5. Run-up to the Case • US Steelworkers Union Complaint • Deadline: 17 September 2009 • China's 2001 Accession Terms • 15 September 2009: Communist Party Annual Meeting • 24 September 2009: G-20 Pittsburgh

6. Analysis US Claims • Imports of tires increased by 215%; from 14 million in 2004 to almost 46 million in 2008. • USITC assessed imports more than tripled their market share in the US. • US must introduce safeguards in order to protect American workers and businesses • Chinese imports were a significant cause of material injury to the American industry.

7. Analysis Chinese Claims Inaccurate assessment by the USITC on market conditions.         Safeguard considered punitive as duties collected from China would not decrease import quantities nor rescue domestic industry.         Condemned safeguards as a discriminatory practice in a forum that encourages free trade and calls for resistance of protectionism

8. Contested WTO Agreements/Provisions • Protocol of Accession Articles: • Transitional Product-Specific Safeguard Mechanism • 16.1 • 16.3 • 16.4 • 16.6 • GATT 1994 Articles • I:1 General Most-Favored Nation Treatment • II Schedules of Concessions • XIX Emergency Action on Imports of Particular Products

9. Analysis Outcome:  USITC correct in its assessment of conditions of domestic tires market:         - Causation analysis, and         - Market condition analysis (proper evaluation of import trends) A "significant cause" requires rapidly increasing imports to make an important or notable contribution in bringing material injury to the domestic industry

10. Analysis There was indeed a significant cause of material injury to the domestic industry         Imports from China had harmful effects independent from changes in demand         USITC correcty identified the effects of imports from China from the effects of imports from third countries 

11. Section 421 of the Trade Act of 197419 U.S.C. § 2451 "If a product of the People’s Republic of China is being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of a like or directly competitive product, the President shall, in accordance with the provisions of this section, proclaim increased duties or other import restrictions with respect to such product, to the extent and for such period as the President considers necessary to prevent or remedy the market disruption."

12. Implementation Source USITC

13. Implementation of Safeguards Modification to Harmonized Tariff Schedule of the United States      - Chapter 99, subchapter III, paragraph 4 Import relief in the form of additional duties for a period of 3 years:      1st year, additional duty of 35% ad valorem      2nd year, additional duty of 30% ad valorem      3rd year, additional duty of 25% ad valorem Effective September 26, 2009 by Presidential proclamation      - Proclamation 8414

14. Source: China Daily News

15. Right Message   Tremendous Victory: fight for U.S. jobs and business Enforce Trade Agreement   Promote free trade Not tolerate predatory  trade policies   Protect manufacturer's interest Support Organized Union   Accommodate domestic policy  Bad Policy Global protectionism  Poor Timing Threatened the U.S. relations with China  Organized Labor vs. U.S. producers  Increase production in other developing world Sullying its international standing Implications on U.S. Trade Policy

16. Implications of U.S. Trade Relations • Create an uncertainty to the future of the world economy-nascent and fragile recovery.  • Increase international skepticism towards U.S. stance towards free trade. • WTO-difficult time enforcing free trade agreement.  • Fear of trade war between the world two largest economies.  • Unleash a protectionist backlash in the U.S. • Affect our national security efforts. 

17. Impact on U.S. Competitiveness • Made U.S. production less attractive  • Move U.S. jobs to other developing countries: Indonesia, Mexico or Brazil • Caused market disruption specially for domestic producers  • For more than a dozen jobs will be lost for every job protected •  Increased concerns about the impact of higher-priced tires on increasingly-pinched consumers.

18. Sources: NYT, WSJ, Times, USA Today, and China Daily online editions.

19. Questions and Answers • Was this a smart move for the United States? • Should China have won the settlement? • What do you think this case represents in the bigger picture? • What does this case say about the dispute settlement process? • Does this add or remove WTO's legitimacy?

20. Sources • http://www.cato.org/pub_display.php?pub_id=10649 • http://www.prnewswire.com/news-releases/usw-cites-wto-labor-day-order-against-china-tire-imports-129268238.html • http://www.ustr.gov/about-us/press-office/press-releases/2011/september/united-states-prevails-wto-dispute-about-chinese • http://www.globaltimes.cn/NEWS/tabid/99/ID/674318/China-regrets-WTO-ruling-on-tire-tariffs.aspx • http://www.economist.com/node/14460069 • http://www.law.cornell.edu/uscode/19/2451.html • http://www.worldtradelaw.net/misc/ChinaAccessionProtocol.pdf • http://assets.opencrs.com/rpts/R40844_20110131.pdf