China to Appeal Trade Ruling on Tire Dispute


By ANDREW BATSON

BEIJING—China’s commerce ministry said it would appeal a World Trade Organization ruling that upheld U.S. restrictions on imports of Chinese-made tires, despite doubts from experts on whether it could prevail in the next round of a high-profile trade dispute.

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AFP/Getty ImagesA dealer sits next to tyres on display at a tyre shop in Beijing.

China had gone to the WTO to challenge President Barack Obama’s decision in September 2009 to levy tariffs of up to 35% on Chinese tires in response to what the U.S. said was a surge in tire imports from China that was hurting U.S. competitors. The case was an emotional one, since the U.S. move made use of a so-called safeguard mechanism, spelled out in China’s WTO accession agreement, that is unique to China and allows trading partners to restrict imports from it without meeting the same burden of proof required for other countries’ goods.

After a year of hearings and legal maneuvering, the WTO’s dispute-settlement panel ruled Monday that the U.S. had been within its rights to impose the tariffs. The loss for China was not surprising, trade experts said, since the country had clearly agreed to the safeguard mechanism when it joined the WTO. But China fears that the U.S. victory could embolden other countries to block more shipments from the world’s largest exporter.

“The Chinese side is deeply concerned about the possible negative impact from the panel’s decision,” the Ministry of Commerce said in a statement Tuesday on its website, adding that it “will carefully study the panel’s report and lodge an appeal at an appropriate time, in order to protect the lawful rights and interests of Chinese industries.”

Chinese government and industry officials had warned after the U.S. move last year that the tariffs could trigger large layoffs in China’s tire industry. But it’s unclear whether those fears have been born out. China doesn’t publicize detailed employment data. The China Rubber Industry Association, one of the groups that complained last year, declined to comment Tuesday.

The Commerce Ministry’s statement didn’t mention any impact on Chinese jobs. Rather, it argued that the U.S. gained little from the restrictions, pointing to figures showing that U.S. tire imports have increased and jobs in the U.S. tire industry have decreased this year. “While the special safeguard measures caused a significant decline in China’s tire exports to the U.S., the U.S. turned around and increased imports from other countries,” it said in the statement.

The timing of the WTO ruling was inconvenient for China. It came as a large delegation of Chinese officials, led by Vice Premier Wang Qishan, arrived in Washington on Monday night for the latest round of the U.S.-China Joint Commission on Commerce and Trade, a regular series of talks on a range of bilateral economic disputes.

Monday’s loss isn’t China’s first at the WTO, and because it focuses on the safeguard provisions, rather than a broader complaint about the way China manages its economy, its implications are limited.

Still, some Chinese specialists worry the ruling could be damaging if it encourages others to follow suit.

“China’s appeal only served to make the U.S. protectionist tariffs seem more legitimate,” said Tu Xinquan, deputy director of China Institute for WTO Studies in Beijing. “The WTO’s ruling may just further aggravate the situation and encourage more countries to follow the U.S.” in restricting imports from China, he said.

Beyond its planned appeal at the WTO, China’s response is likely to be limited. The country has increasingly channeled its trade grievances through the WTO, which it joined in 2001, winning most of the cases it has brought to dispute-settlement panels.

And there is a limited window for the U.S. or other countries to use the disputed procedure to block Chinese imports. The “transitional safeguard mechanism” that China agreed when it joined the WTO in 2001 will expire in 2013, though that won’t affect countries’ ability to pursue normal antidumping or anti-subsidy cases against Chinese goods.

—Junting Zhang contributed to this article.

Write to Andrew Batson at andrew.batson@wsj.com

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