U.S. wins trade dispute with China over duties on cars, SUVs; 2nd win since March

McClatchy Foreign StaffMay 23, 2014 

— The World Trade Organization ruled Friday that China had violated trade rules when it slapped punitive duties as high as 21 percent on America-made cars and sport utility vehicles.

The ruling was an enormous victory for U.S. automotive manufacturers, coming at a time of rising tensions between the U.S. and China on a range of strategic issues. It was the second time in two months that the U.S. has won a WTO trade case against China. In March, the WTO ruled that China had restricted trade by imposing export duties on so-called rare earth elements, the lightweight, superconductive minerals that are critical to a wide range of high-tech products.

Michael Froman, the U.S. trade representative, hailed Friday’s ruling, which will have the effect of cutting the cost of U.S.-made cars and SUVs imported for sale inside China.

The U.S. auto industry employs nearly 850,000 workers throughout the country, from Michigan to California.

“The message is clear: China must follow the rules, just like other WTO members,” Froman said. He promised to continue to press China to change trade practices “that unfairly restrict U.S. exports.”

Commerce Secretary Penny Pritzker offered similar praise, saying the ruling “supports U.S. automakers and other U.S. exporters that have been forced to bear the burden of China’s opaque trade . . . system.”

The WTO’s decision was issued by a three-member dispute panel chaired by a former Canadian trade minister, Pierre Pettigrew. The panel said China should “bring its measures into conformity” with its WTO obligations by dropping the duties.

The duties _ fees that an importer must pay on items it wishes to sell inside China _ were imposed in 2011 in response to a 2009 petition from Chinese auto manufacturers that U.S. automobiles with large engines were being sold at unfairly low prices.

One set of duties ranged from 2 percent to 21.5 percent of the value of the vehicle, while another set ranged from 6.2 percent to 12.9 percent. They were applied to vehicles with an engine capacity of 2.5 liters or greater and affected popular American SUVs, including the Jeep Grand Cherokee, the Buick Enclave, the Cadillac Escalade and others.

The U.S. complained that the duties had been imposed simply to hurt American sales. China is the second largest export market for U.S. autos, after Canada, accounting for 13 percent _ $8.5 billion _ of U.S. auto exports.

“This is about jobs,” said Sen. Debbie Stabenow, D-Mich., in praising the WTO’s decision. “Today’s ruling is a major victory for American workers and manufacturers and another blow to China’s continued illegal trade practices. It is long past time China recognize that its repeated attempts to flout the rules will not be tolerated.”

Rep . Sander Levin, D-Mich., called the outcome “a significant victory in the fight against China’s practice of retaliating and intimidating those who dare to stand up to it.”

“The United States will not shy away from enforcing U.S. trade laws, and we certainly won’t tolerate the intimidation that China demonstrated in starting the investigation challenged in this dispute,” Levin said.

Praise for the ruling came from Republicans as well, with Rep. Dave Camp of Michigan, the chairman of the House Ways and Means Committee, calling it a “major victory,” and Sen. Rob Portman of Ohio, who once served as U.S. trade representative, calling it “a victory for autoworkers . . . across the country.”

China claimed during the panel’s proceedings on the U.S. complaint that it had ended collecting the duties on Dec. 15 and that therefore the panel had no basis to reach a decision. But in its decision, the panel said that China had presented no proof the duties have been repealed. “As far as the official record of this dispute is concerned, we are not in a position to find that the measures have been terminated,” the panel wrote.

Both China and the U.S. have the right to appeal the panel’s findings.

Zarocostas is a McClatchy special correspondent.

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