US Takes Auto Trade Case Against China to WTO

The US Trade Representative has taken its case challenging China’s imposition of an anti-dumping duty on US-made automobiles to the World Trade Organization (WTO). At stake is more than $3 billion in duties that China now charges for certain models of US-made vehicles imported into China.

The first step in the case will be negotiations with China which can last up to 60 days. If no resolution is reached, a WTO panel may be requested to settle the dispute.

China imposed the duties on US-made vehicles in response to the Obama administration’s decision place a tariff on imports of Chinese-made automobile tires in late 2009. The US imposed a 35% duty on Chinese tires in an effort to cut import quantities and boost job creation at US tire makers like Goodyear Tire & Rubber Co. (NYSE: GT), among others.

Tire imports from China fell, but rose sharply from low-wage countries like Thailand, Indonesia, and Mexico, defeating the job creation aspect of the tariff. About all that happened is that imported tires now cost more.

China’s anti-dumping duties on US-made cars raises the price to Chinese consumers an amount that is nearly equal to the US tariff on Chinese-made tires. Both Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) have sold more cars in China in 2012 than they did last year, although many of the cars are built in China and are not subject to the added costs.

Paul Ausick