An Analysis of China-U.S. Trade in Tires, Term Paper Example

In 2006, the European Union and United States, followed by Canada, filed dispute (DS340) for consultation with the World Trade Organization (WTO) against China in complaint of auto parts export trade to those markets. In 2008, the WTO reached a decision regarding the grievance, and measures responsive to importation of Chinese auto parts to those countries includes taxes and tariffs, and the export to China with following stipulations:  “(a) Policy on Development of Automotive Industry (Order No. 8 of the National Development and Reform Commission, 21 May 2004);  (b) Measures for the Administration of Importation of Automotive Parts and Components for Complete Vehicles (Decree No. 125), which entered into force on 1 April 2005);  and, (c) Rules for Determining Whether Imported Automotive Parts and Components Constitute Complete Vehicles (General Administration of Customs Public Announcement No. 4, which entered into force on April 1, 2005;  as well as any amendments, replacements, extensions, implementing measures or other measures related” (WTO, 2008). Implementation on August 31, 2009 articulated Subsidies and Countervailing Measures: Art. 3, 3.1(b), 3.2; Trade-Related Investment Measures (TRIMs): Art. 2, 2.1; and GATT 1994: Art. II, II:1, III, III:2, III:4, III:5, XI:1, with respect to the claim(s), and the United States countered decision indicating that the Policy Order 8, Decree 125 and Announcement 4 are inconsistent with Article III:5 of the GATT 1994, TRIMs Agreement and SCM Agreement. According to the WTO mediation, the Panel “decided to exercise judicial economy,” and “recommended that the DSB request China to bring these inconsistent measures as listed above into conformity with its obligations under the GATT 1994 and the WTO Agreement” (WTO, 2008).

Since China’s late entrance into the WTO as a member state at the beginning of the 21^st century, the nation’s rapidly expanding global economic prospects have instigated a number of ongoing WTO disputes with the developed countries in particular, as the country advances in exportation of a virtual stockpile of inexpensive products, and including a massive influx of auto and other related products such as tires into the national markets of former world trade leaders in export like the United States. The WTO disputes with China have been promoted by, and furthered by a high degree of protectionism, as China and its trade partners attempt to shore up inequitable GDP and industrial surplus in their economies, not to mention compete.

According to the United Steelworkers Union in 2009, imports of tires from China in 2008 reached approximately 46 million in imports, up from 15 million in 2004, which cost the United States about 5,000 tire worker jobs (Reuters, 2009). The U.S. International Trade Commission (ITC) requested a cascading 55% tariff that would drop to 45% percent year two, and 35% in each subsequent year. Chinese tire makers rejected the new tariff structure, and argued that they would be shut out of the U.S. tire market upon enactment of this policy. At present, China supplies 17% of the market with predominantly low cost tires, and that such an act will inevitably safeguard the United States, but continue condemnation by China’s Ministry of Commerce. With both Canada and the United States citing protest against the current trade relationship, the impact of tariffs and taxes by individual nations in the NAFTA trade bloc, will ultimately affect the Chinese tire export business in the region overall, as automotive manufacturing and auto parts in general circulate for assembly and secondary trade distribution also in Mexico (Wise, 2006).

Measures such as the WTO disputes have also been met with a response by China, but not so much legally, but fiscally. In the past several years there have been numerous bills to not only raise the value of the national currency, the Yuan, but to peg it to developed economies, and hence put it into circulation for exchange internationally. China is prepared to compete from a capitalistic rather than mere protectionism position, and since the devolution of the global economy in 2008, the country has only benefited from the advancement of inexpensive exports abroad.

Some query into labor issues in US-China trade persist and reactions from unions in the United States are paralleled by a barrage of U.S. legal infiltration into the international arena, and especially toward target of workers’ rights as human rights in China. In an effort to buffer against intense competition by China’s industrial sectors, the AFL-CIO, an influential trade union membership in the U.S., has sought “unprecedented petition under Section 301 of the Trade Act of 1974” in denunciation of ‘sweatshop’ like conditions in Chinese work environments (Yu, 2007). The claims have of course also served as a mechanism of protectionist activism; and to some effect in terms of international consensus on labor related elements within Chinese labor standards (i.e. $0.64 hourly labor cost) as understood according to the UN OECD, Core Labor Standards which constitute the framework for the Fundamental ILO Conventions (Yu, 2007). The Standards four basic provisions: 1) Elimination of exploitative child labor; 2) Abolition of forced labor; 3) Non-discrimination in employment; and 4) freedom of association. China’s response to the AFL-CIO complaint was critical, rejecting the grievance as a U.S. interest toward future benefits within competitive market draw, rather than as a key point of trade negotiation.

Has the United States done enough to render a clear picture of bilateral trade and investment between China and its economic goals and objectives? The WTO disputes stand at the center of US-China trade tensions at present. Linked to the China – Auto Parts complaint are a series of related complaints elicited by China countering the United States’ application of “dumping and subsidies remedies against China” (Griffith, 2010). The dumping issue in particular speaks to the domino effect prompted by a glut of cheap exports in the international chain of trade, and especially in the case of the United States where demand for such products is high. The critical damage caused by subsidies is also readily assessed in this case, where products like inexpensive tires are put into circulation at cut rate price points enabled by China’s government subsidy practices; hence toppling national brands in the U.S. in the process. Dumping of bulk goods in this manner has prompted concerns by the United States, but the WTO is also careful in its handling of those cases with China, as decisions must be reached to avoid “double remedy” (Griffith, 2010).

Are remedies in fact appropriate in dumping cases involving China is an ongoing debate, and one which the United States meets a double bind in its only partial signatory to the Basel Convention. Since the Summary of the Final Act of the Uruguay Round 1986 to 1994, Agreement on Implementation of GATT Article VI (Anti-dumping), amendments to the existing signatory protocol, with some volitional agreement to liability and oversight by member states, is questionable. The United States has not furthered its obligation to agree to compensatory payment for dumping violations under the Convention. China, not a signatory to the Convention, is cited often for violation of the treaty. The perspective of the WTO is predictably one of competitive market assessment. The fairness of anti-dumping is addressed through the stipulations of ratified legislative policy, and in particular the articulation of the General Agreement on Tariffs and Trade (GATT). Application of the GATT to DS340 and other related disputes involving US-China trade will continue to entrench the two countries trade motives despite the U.S. dedication to ‘free trade’.

References

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Dispute Settlement: Dispute DS340 China — Measures Affecting Imports of Automobile Parts (2008). World Trade Organization. Retrieved from:  http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds340_e.htm

DOHA Declaration on Anti-dumping GATT Article VI, Section 7. WTO. Retrieved from: http://www.wto.org/english/tratop_e/dda_e/implem_explained_e.htm#antidumping

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