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China and US rule out “trade war”
Published on: 2009-09-16
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BEIJING, Sep. 16 -- China and the United States have continued to exchange words defending their retaliatory measures in their latest trade row, while offering assurance that neither want to see a trade war.

At a press conference Tuesday, the Ministry of Commerce (MOC) refuted Washington's accusation of violating WTO agreements by flooding the US market, and said China's US-bound tire exports actually declined in the first half of 2009, not disrupting the US market, as Washington had claimed.

The comment came shortly after the Bloomberg news agency yesterday quoted US President Barack Obama as saying, "We have rules on the books," while downplaying the possibility of the two nations beginning a trade war.

MOC spokesman Yao Jian said Obama's decision last week to raise duties on Chinese imported tires is an abuse of special safeguard measures, and "sends a wrong signal to the world amid the financial crisis."

However, Yao downplayed the possibility of the two countries waging a trade war, saying, "We don't want to see individual trade remedy cases hurt bilateral trade and the economic relationship."

China's tire exports to the US rose by 2 percent in 2008, but fell by more than 15 percent in the first half of 2009, according to MOC data.

"The conclusion that China's exports are distorting the US market does not stand," Yao said, insisting that US tire manufacturers did not join the petition, which was brought by the United Steelworkers union.

Some of the largest US tire companies did not take part in the petition for relief from Chinese tire imports. Goodyear, the largest US tire maker, stayed neutral, while Cooper, the second-largest US tire maker, opposed the petition, Bloomberg reported yesterday.

Safeguards can be applied if a surge in imports hurts US manufacturers, and once invoked on a specific product, other countries may follow and implement the same punishment, Bloomberg said.

Yao's comments came after Obama expressed his hope in an interview with Bloomberg Monday, in which he said, "We're not going to see a trade war."

Obama admitted "there are some tensions around this," but defended his stance by saying, "My message is very simple: We have rules on the books."

He argues that the enforcement of the existing trade rules is "to build support among lawmakers and the American public," while Stephanie Lester, vice president of the Retail Industry Leaders Association, which also represents companies such as Wal-Mart and Target, criticized Obama's move as "a bow to political pressure," according to Bloomberg.

When asked what he would say to Chinese President Hu Jintao at the G20 summit next week in Pittsburgh, Obama said, "We've got to establish credibility and enforcement of the rules precisely because I want to further expand trade." 
Zhou Shijian, a trade expert and senior counselor of the All China Lawyer Association, asked, "How can they be so unfair?" adding that statistics have shown that China's exports fell last year and did no harm to US industries.

Obama signed through a petition last Friday on imposing duties of 35 percent in the first year, 30 percent in the second and 25 percent in the third year on $1.8 billion worth of automobile tires from China.

Beijing filed a World Trade Organization (WTO) complaint Monday in response. On Sunday, it launched anti-dumping and anti-subsidies investigations into automobile and chicken products from the United States.

A Reuters report speculated yesterday that "the ire in Washington" might derive from the surge of the US trade deficit with China, which totaled $103 billion in the first half of 2009, down 13 percent from last year but still a considerable surge over the last decade.

Limited impact

Shares of Chinese tire makers jumped Tues, after industry comments that the impact of the tariffs would be "limited."

Shanghai-listed Giti Tire told the Global Times that the impact is limited as tires for home-owned cars exported to the US make up only about 10 percent of its total production capacity.

"The high tariffs will certainly hurt the interests of US consumers and sellers, as they can no longer get high-quality, cheap products," Shen Jiawei, executive director of Giti Tire China, told the Global Times.

Doublestar, another tire maker listed on the mainland stock exchange, also told Reuters that direct impact of the US tariffs would be minimal.

"The two countries' restraint shows that both know the bilateral relationship must not be further harmed by a single industry while they have so many common interests," Wan Jun, a researcher into the world economy at the Chinese Academy of Social Sciences, told the Global Times.

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