U.S. and China in trade dispute

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Saturday, September 19, 2009

The United States (U.S.) and China this week initiated a trade dispute over tires, auto-parts, and poultry products just a week ahead of the 2009 G-20 trade summit in Pittsburgh, Pennsylvania.

The most recent trade policies enacted by the U.S. government includes a September 12 decision to impose a 35% trade tariff on Chinese tire imports as an anti-dumping measure. The trade policy came about as a result of a trade-complaint initiated by the United Steelworkers Union (USW) filed before the U.S. International Trade Commission. As reported by Steve Levine of BusinessWeek, "In [the USW's] trade complaint to the U.S. International Trade Commission, the USW invoked a provision in China's 2001 accession to the World Trade Organization (WTO) that allows protection from surging imports from the country [China]. The union documented a tripling of Chinese tire imports from 2004 to 2008 [...]" The Trade Commission initially recommended a 55% tariff however, President Obama agreed to only 35%. The trade tariff will be diminished by 5% per year for the next three years to 25%. The deadline for President Obama's decision was September 17. The trade tariff will take effect on September 26, pegging rates at the new level from the current 4%. The dispute will now move to the WTO where it can take up to 18 months for adjudication.

To quantify the impact of the tariff, in 2008 China supplied US$1.8 billion in tires to the U.S. or about one-third of the U.S. market, with two-thirds of U.S. companies producing their tires in China. It's likely that the effects of the suit will exceed $1 billion in trade costs, as reported by several other news agencies.

On the 14th of September, the Chinese government via its Ministry of Commerce website, announced that they would institute an investigation into the dumping of U.S. auto parts and chicken products; they are also filing a complaint at the WTO regarding this matter. A formal announcement of trade tariffs against U.S. goods has not occurred.

The two countries' executive and economic teams will meet in Pittsburgh for the G-20 meeting on September 24 and 25 to discuss these and other economic issues.