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US-China Relations: How Tires Cause Friction Between Nations

Posted by Joseph Whitcomb on Jul 30, 2014 9:27:50 PM
Joseph Whitcomb

US-China Relations: Where the Rubber Meets for the Road

US-China relations  is a fascinating case study in international law. The two superpowers seem to butt heads on everything. From trade rules to human rights, it seems more newsworthy when the two countries agree than when they disagree.

Recent news foreshadowed what may be the next source of tension between the countries: tires. The US International Trade Commission (US ITC) voted to begin an investigation into possible “dumping” of tires imported from China.

US ITC vs. WTO

Based on the results of its investigation, a determination will be made whether or not to issue anti-dumping and countervailing duties against China.  The US ITC should not be confused with the WTO (World Trade Organization).

The former is a domestic US agency that defines itself as “an independent, quasi-judicial Federal agency with broad investigative responsibilities on matters of trade.”  It works with the US Department of Commerce to conduct its investigations, and then Commerce is the agency that actually institutes any duties.  The WTO in contrast is an international trade organization of which the US is a member.  The WTO enforces international trade rules and as a whole seeks to minimize the barriers to trade between member countries.

Dumping and Countervailing Duties

Dumping, anti-dumping, and countervailing duties are three terms that must be understood to understand international trade. The short definitions are as follows.

Dumping is when manufacturers in Country A export a product to Country B at a price below cost or for a lower price than it sells the products for in Country A.  It is considered a form of “predatory pricing” because it harms manufacturers for the good in Country B.  

As for US-China, domestic US tire producers are harmed.  Sometimes it is subsidies from Country A that allow manufacturers to accomplish this predatory pricing.

Anti-dumping and countervailing duties are measures used to counteract the effects of dumping or illegal subsidization.  They are taxes placed on the importation of specific products by Country B from Country A.  In the news case, it would be taxes on the import of tires to the US from China.  Generally, anti-dumping measures counteract dumping and countervailing duties counteract subsidization.

Different Reactions

Final determinations on antidumping and countervailing duties are due from the US ITC in December 2014 and February 2015.  

Although the final decisions are still months away, some Chinese manufacturers are already reporting cancelled deals.  In contrast, the United Steelworkers (USW), the US union that brought the issue before the US ITC, praised the decision.

The USW has stated that it benefited from sanctions against Chinese tires in 2009 and upon the expiration of those sanctions immediately saw Chinese tire imports grow at an incredible rate, from 24.5 million in 2011 to 50.8 million in 2013.

International Trade Law Advice

Are you engaged in international trade or business operations?  Let the attorneys at Whitcomb Law, P.C. handle the legal side of the house so you can focus on the business.

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Topics: International Law

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