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White House Decision on Chinese Tires a Setback for SGMA Overseas Market Access Objectives

On September 11 the White House announced President Obama’s decision to grant import relief in the precedent-establishing China-specific safeguard (Section 421) investigation on Chinese tires.  The decision was to apply safeguard duties phasing down from 35 percent to 25 percent over a three-year period.

The decision triggered a prompt response from China.  Calling the U.S. decision “a grave act of protectionism” that “sends the wrong signal to the world” at a time of economic crisis, China’s Ministry of Commerce announced that it would be initiating antidumping investigations against U.S. exports of chicken and auto parts.  Another element of the fall-out from the Obama Administration’s decision is likely to be increased filings by other U.S. industries under Section 421 and other U.S. trade statutes in the coming months.

U.S. trade relations with China are likely to be able to withstand these developments at the bilateral level.  However, there will be significant repercussions internationally.  First, because the White House decision goes against the earlier G-20 pledge to avoid protectionism during this period of economic and financial turmoil, it will sour the atmosphere at the September 24-25 G-20 summit in Pittsburgh and undercut the prospects for securing significant progress there on the Doha Round WTO negotiations that are so important to SGMA members’ overseas market access objectives. 

Second, this precedent-establishing U.S. decision to grant relief in a China-specific safeguard case could embolden other trading partners to do the same.  By making clear the intensity of its concerns about trading partners’ usage of the China-specific safeguard mechanism, China had been successful to date in warding off affirmative decisions in such cases around the world with near perfect success outside the textile sector.  This adverse decision by the United States now puts a major breach in that wall of defense, and the prospects for other countries taking similar actions in other product areas now has increased significantly.

 POSTED- September 14, 2009

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