China unveiled data on Tuesday that showed tire exports to the United States fell in the first half of 2009, saying the numbers undercut Washington's accusations China had breached rules by flooding the U.S. market.
Both countries moved to allay concerns of a trade war. But the row over Washington's decision to impose added duties on Chinese-made tires showed no signs of abating, as Beijing said the U.S. move sent the wrong message to the rest of the world.
This certainly won't benefit ordinary Americans, and the bigger damage is to economic and trade cooperation between our two countries, said vice foreign minister He Yafe. That's something the U.S. needs to seriously consider, He said, adding that any friction should be handled calmly.
The tire duty was the first time Washington has applied special safeguard provisions Beijing agreed to before joining the World Trade Organization in 2001.
Safeguards can be invoked if a surge in imports is found to have hurt U.S. manufacturers. Once invoked on a product, they can be applied by other countries.
We mainly think that it's an abuse of safeguard measures, China's commerce ministry spokesman Yao Jian told reporters.
It is sending a wrong message to the world under the current situation that the global financial crisis is still spreading.
China said it wanted consultations with the United States over the duties, a preliminary step toward seeking a WTO ruling.
Yao rejected U.S. claims that a surge in imports has hurt American industry and jobs, saying Chinese shipments had fallen off and globalization meant barriers to Chinese imports would not guarantee U.S. jobs.
Chinese statistics show tire exports to the United States rose by 2 percent in 2008, and fell by more than 15 percent in the first half of 2009, Yao said.
Under these circumstances, the conclusion that China's exports are distorting the U.S. market does not stand, Yao said, noting that U.S. tire manufacturers had not joined the complaint, which was brought by the United Steelworkers union.
The United Steelworkers union said a tripling of Chinese tire imports from 2004 to 2008 had cost more than 5,000 U.S. jobs.
The U.S. trade deficit with China totaled $103 billion in the first half of 2009, down 13 percent from last year, but it has grown considerably over the last decade. The imbalance is a source of much ire in Washington.
TRADE WAR CAN BE AVOIDED
The two countries have vowed to cooperate in trying to revive global economic growth, but the new trade friction could spill into next week's G20 summit in Pittsburgh.
Zhang Hanlin, head of the China Institute for WTO Studies in Beijing, said U.S. tire makers were suffering from a drop in demand due to the economic crisis, not Chinese competition.
Chinese car makers and auto parts makers could become increasingly competitive in export markets, as their capacity exceeds domestic demand. That could threaten the traditional manufacturing base of European and American auto firms, many of whom initially invested in China to benefit from Chinese growth.
Of the tires exported from China, 68 percent were from foreign-invested plants, Yao said.
U.S. President Barack Obama said that if the United States didn't enforce the rules that were contained in its trade agreements, then it's very hard to have credibility. But he added he was sure a trade war could be averted.
I'm not surprised that China's upset about it, Obama told CNBC television. But keep in mind we have a huge economic relationship with China. But I just want to make sure that if we actually have rules written down, they mean something.
China has so far shown no signs that the trade disagreements would spill into other issues of international cooperation, such as North Korean or Iranian nuclear negotiations.
China has launched its own investigation into chicken parts and automotive imports from the United States. It says the U.S. products targeted by Beijing's anti-dumping inquiries are roughly equal in value to China's tire exports to the United States -- about $2 billion a year. [ID:nLD476384]
Outwardly, China's response will be restrained, but in its bones the anger will persist, said Guan Anping, a trade lawyer in Beijing who formerly worked as a trade official.
China will use small acts to convey its anger, but the message will be clear.
(Additional reporting by Huang Yan, Tyra Dempster, David Schlesinger and Chris Buckley)