On 29 October, three weeks before US President Barack Obama’s first visit to Asia, China and the US resolved a number of trade issues at a meeting in Hangzhou. China said it would lift a ban on the import of US pork, which had been introduced as a result of the swine flu outbreak earlier in 2009. It also agreed to remove local content requirements in tenders for wind power generation equipment, and to treat Sino-foreign joint ventures as domestic businesses in bidding for government procurement contracts. The US trade representative involved in the talks claimed that China would also submit an offer to join the WTO’s government procurement agreement by 2010.
For its part, the US agreed to set up a joint working group on the issue of awarding “market economy status” to China. China has consistently sought such status, which would make it more difficult for the US to accuse it of dumping.
But despite the apparent progress in Hangzhou, trade issues still featured in President Obama’s visit to China in November, with President Hu Jintao emphasizing the need to oppose protectionism.
In September, Obama signed an order to impose a new 35% duty on imports into the US of Chinese tyres, on top of an existing 4% tariff. Obama’s action followed a petition from the United Steelworkers Union, and is intended to protect the jobs of US tyre-factory workers allegedly jeopardized by cheaper Chinese imports.
The US imposed the tyre tariff under a “special safeguard” provision in the WTO’s rules against imports from China. According to Wang Lei, a senior partner at Gaopeng & Partners in Beijing who was previously a deputy director for trade policy and WTO affairs at the Ministry of Foreign Trade and Economic Cooperation, this distinguishes the tyre tariff from the more common anti-dumping cases. “Unfortunately, when China joined the WTO, it was in my view forced to accept a reservation made by members. Members can use special safeguards against imports from China only,” he said.
The special safeguard tariff imposes extra costs which effectively bar Chinese tyre manufacturers from the US market.
According to Wang, a number of special safeguard actions have been initiated since China joined the WTO. But in the US special safeguard actions require the signature of the president, and until the tyre case, none of the actions succeeded in getting that far. “This time appears to be exceptional,” said Wang. “The Obama administration approved this action. So in my view it is an action with landmark effect.”
The special safeguard tariff on tyres is due to end in 2012 unless the case, which has been referred to the WTO, is resolved sooner. The good news for Chinese industry is that whatever else happens, the special safeguard provision expires once and for all in 2013. “It’s a transitional provision,” said Wang. “There is no way to renegotiate or extend it.”