27 July 2017

W.T.O. Sides With U.S. in Dispute Over Chinese Car Tariffs

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WASHINGTON — The World Trade Organization sided with the United States on Friday in a dispute over punitive Chinese tariffs on American exports of cars and sport utility vehicles.

China had already lifted the tariffs in question but American officials declared it a victory, citing the decision as the latest in a series of rulings that it has won against Beijing.

“China has had 14 years — 14 years — to start playing by the rules,” said Senator Debbie Stabenow, a Michigan Democrat, at a news conference in Washington. “But instead we see illegal and improper activities over and over again. As long as China keeps up this illegal behavior, we can and must respond with these kinds of strong enforcement actions.”

The decision comes against a backdrop of increasing acrimony between Beijing and Washington as the Obama administration is pushing Chinese leaders on commercial spying and hacking while China has become more aggressive in asserting its claims against United States allies in the South China Sea.

A W.T.O. panel in Geneva spent more than a year reviewing legal briefs from the two sides over the Chinese commerce ministry’s abrupt imposition in late 2011 of antidumping and anti-subsidy tariffs on the large-engine family vehicles.

China imposed antidumping tariffs of 2 to 8.9 percent on American cars and S.U.V.s with an engine displacement of more than 2.5 liters in December 2011, alleging that these vehicles were being sold to dealers in China for less than the full cost of manufacturing them. China also imposed additional anti-subsidy tariffs of 12.9 percent on large-engine passenger vehicles from General Motors and 6.2 percent on these vehicles, mainly Jeeps, from Chrysler.

China’s “unjustified duties” affected about $5 billion in automobile exports, said Michael B. Froman, the United States trade representative. “This is also an important victory that impacts our nation’s workers and their families.”

American trade officials said that they did not know the actual dollar value of any lost sales because of China’s tariffs.

Beijing contended that the government-managed bankruptcies of G.M. and Chrysler had the effect of providing subsidies for these manufacturers’ exports.

The W.T.O. panel found that in imposing penalties on imported large-engine vehicles, China had failed to prove first that the imports were causing any injury to its domestic industry. International free-trade rules require a so-called injury determination to prevent countries from imposing tariffs to forestall imports from entering at all, instead of waiting to see if they actually cause a problem.

The panel also found fault with the Chinese government’s methodology in calculating that automakers with factories in the United States — including Daimler, which makes Mercedes-Benz, and BMW of Germany — had underpriced their sales in China. Large cars and S.U.V.s in China often cost as much as three times as the same models cost in the United States, although this is mostly because of heavy taxes that China has imposed in large-engine market segments where its domestic manufacturers have virtually no sales.

The importance of the ruling is less for the auto industry than for the limitation it imposes on China’s ability to suddenly place antidumping or anti-subsidy tariffs in response to foreign trade actions that it dislikes. But China could still amend its procedures and impose such tariffs if it follows a considerably longer, more transparent procedure and acts against companies that are more clearly dumping their products or exporting them with government subsidies.

Click herefor the full article in the New York Times.

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