Key Points:

  • On September 11, President Obama imposed 35 percent tariffs on China’s tire exports to the United States
  • This marks the first time the United States has invoked the China-specific import surge mechanism

On September 11, President Obama decided to place safeguard tariffs on China’s exports of car and truck tires to the United States. This marks the first time that the United States has invoked the general product safeguard in China’s WTO accession agreement. It is widely believed that invocation of the safeguard in the tires case will lead to additional China safeguard petitions in the United States, as well as petitions in third-country markets such as the EU and India.

When China entered the WTO in 2002, it agreed to a special safeguard (often called the 421 Safeguard or the general product safeguard). Under the terms of this China-specific safeguard any WTO member can restrict imports from China if the imports are increasing and are causing “market disruption.” Unlike other trade remedy laws, the 421 safeguard requires no showing of “unfair” behavior, such as price discrimination or subsidies, by producers from China. The safeguard expires at the end of 2013. Under US law, the petition is first reviewed by the US International Trade Commission (ITC), which determines whether US manufacturers have been injured by imports. If the ITC finds injury, the petition then moves on to the White House, which may reject the petition if the president determines that invocation would not be in the “national economic interest.”

Until now, the United States had never invoked this general product safeguard. During the first term of President George Bush, he and the independent ITC rejected several 421 safeguard petitions, finding that invocation would not be “in the national economic interest of the United States” to limit fairly traded goods or that US manufacturers had not been injured by the subject imports.

Last May, the Steelworkers Union filed the first 421 safeguard petition of the Obama Administration, seeking limits on imports of consumer tires from China. Squire Sanders was soon hired to represent China’s tire producers via stakeholder trade associations. In late June, the ITC ruled 4 to 2 that US tire manufacturers have been harmed by imports from China. The White House, with the advice of the US Trade Representative, had until September 17 to decide whether to invoke the safeguard and, if so, to establish the size of the tire tariffs or quotas. Late on the Friday (September 11) before the deadline, the White House announced a decision to impose a 35 percent tariff on tire imports in the first year, 30 percent in the second year and 25 percent in the third year.

Trade policy observers widely view the tires safeguard decision as the first key harbinger of the Obama Administration’s China trade policy. Invocation marks a departure from prior practice and will likely lead to additional safeguard petitions in the United States and other markets. Squire Sanders’ trade practice team in Washington DC and China will continue to monitor potential cases.