1. DS399
WTO Dispute between China and the United States over Higher Tariffs on Tires
Ishraga Eltahir, Yuhong Deng, Ricardo De Los Rios

3. The position of the main parties
Complainant
China
Respondent
United States
Third parties
European Union; Japan; Chinese Taipei; Turkey; Viet Nam

4. What is DS399
The USITC measured that the increased imports of the tires from China were disrupting and damaging the American domestic industry.
In late 2009, a presidential decision came into effect to add duties to the subject tires for a period of three years.
Year 1 – 35%
Year 2 – 30%
Year %
The USITC measured that the increased imports of the tires from China were disrupting and damaging the American domestic industry, based on section 421 of the Trade Act of 1974 (19 U.S.C. 2451 et seq.),
On sept 14, 2009, A presidential decision, by then President Obama, chose to add the duties of subject tires imports from China, adding additional duties in the amount of 35% ad valorem in first year, 30% ad valorem in second year and 25% ad valorem in third year.

5. What is DS399?
On September 14, 2009, China presented a complaint with the WTO in response to the increased tariffs, which it believed were unfair.
They requested establishment of a panel to look into the matter.
Thus, China proposed a complaint with the WTO for responding to the increased tariffs on passenger vehicle and light truck tires in the United States.
They requested establishment of a panel to look into the matter.
According to China the higher tariffs were inconsistent with Article I:1 of the GATT 1994 and have not been properly justified by Article XIX of the GATT 1994 and the Agreement on Safeguards.
China also said that the tariffs are not properly justified as China-specific restrictions under paragraph 16 of its Protocol of Accession

6. Agreements cited in DS399 Agreements cited in DS399
GATT 1994: Art. I:I, II, XIX
Protocol of Accession: Art. 16.1, 16.3, 16.4, 16.6
Section 421 of the Trade Act of 1974 (19 U.S.C. 2451 et seq.).

7. China’s 7 Specific Claims
Based on Protocol of Accession
Failure to properly evaluate the causation standard of paragraph 16
Failure to properly evaluate whether the imports were in ”such increased quantities” and “increasing rapidly”
Failure to properly evaluate whether the imports were “significant cause” of issues
Imposed transitional safeguard measure went beyond the “extent necessary”
Imposed transitional safeguard measure period went beyond a period of time that was “necessary”
the United States failed to evaluate properly whether imports from China were in “such increased quantities” and “increasing rapidly” as required by paragraphs 16.1 and 16.4 of the Protocol;   
the US statute implementing the causation standard of paragraph 16 into US law was inconsistent “as such” with paragraphs 16.1 and 16.4 of the Protocol;  
the United States failed to evaluate properly whether imports from China were a “significant cause” as required by paragraphs 16.1 and 16.4 of the Protocol;  
the United States imposed a transitional safeguard measure that went beyond the “extent necessary”, and thus it was inconsistent with paragraph 16.3 of the Protocol;  
the United States imposed a transitional safeguard measure for a three-year period that went beyond “such period of time” that was “necessary”, and thus it was inconsistent with paragraph 16.6 of the Protocol

8. China’s 7 Specific Claims
Based on GATT 1994
6) the United States did not accord the same treatment to the China tires as it did to other countries
7) The measure consisted of unjustified modifications of US concessions
the transitional safeguard measure was inconsistent with Article I:1 of the GATT 1994 as the United States did not accord the same treatment that it grants to passenger vehicle and light truck tyres originating in other countries to like products originating in China;
7) the transitional safeguard measure is inconsistent with Article II:1(b) of the GATT 1994 as the tariffs consist of unjustified modifications of US concessions on passenger vehicle and light truck tyres under the GATT 1994.

9. What did they want?
China asked that the panel recommend that the United States promptly comply with its obligations and withdraw the excess tariffs.
The United States asked the panel to reject China's claims in their entirety.
China asked that the panel recommend that hte US promptly comply with its obligations and withdraw the excess tariffs. It believed that safeguard measures were unfairly imposed, which according to the WTO are:
action taken to protect a specific industry from an unexpected build-up of imports — generally governed by Article 19 of GATT.
In textiles and clothing, allows members to impose restrictions against individual exporting countries if the importing country can show that both overall imports of a product and imports from the individual countries are entering the country in such increased quantities as to cause — or threaten — serious damage to the relevant domestic industry.
The US asked the panel to rejct China’s claims in their entirety because these safeguard measures were actually waranted.

10. The Panel’s Findings and Appeal
The US was not in violation of any of the cited agreements, rejecting all of China’s claims.
China appealed the decision of the panel on May 24, 2011
On December 13, 2010, the Panel circulated the report finding that the US was not in violation of any of the cited agreements, and effectively rejecting all of China’s claims.
So, on May 24, 2011 China appealed the decions of the panel .

11. China’s appeal of the decision failed
China’s appeal of the decision failed. The Panel’s findings were upheld and the report was adopted.
The appellate body released their report on september 5, 2011, upholding the panel’s findings. Nothing was imposed on the United States and the increased tarrifs that were presented as a safeguard measure stood.

12. TIMELINE OF THE DISPUTE
Requested consultations
14 September 2009
Establishment of Panel
19 January 2010
Circulation of Panel Report
13 December 2010
Circulation of AB Report
5 September 2011
Adoption
5 October 2011
From the request for consultation to the adoption of the Appellate Body’s report, the case took about two years or 25 months.

13. Economic and Political Context of Dispute
Expectations of Obama concerning International Trade
China and US Disputes over Currency Manipulation / Trademark Protections
Massive uptick of Chinese tires in the US Market
The Role of the Labor Unions
Rhetoric leading into the 2008 Presidential Campaign indicated that Obama was trending towards a trade friendly and inclusive approach to trade policy
Indicated at times during the campaign of needing to take a harder stance on China’s approach to
Currency Manipulation / Trademark Dispute
Period of uncertainty between the two nations.
In the leadup to the 2008 elections, candidate Obama was accusing China of currency manipulation. The Treasury Dept. was hesitant to call China on their supposed manipulations but they did state the yuan was undervalued ands shown by China’s huge trade surpluses and foreign exchange reserves, it did not estimate the level at which the yuan, also called the renminbi, should be trading.
2. Serious concern was coming from the Obama Administration stressing how China was doing a subpar job of ensuring
Massive Uptick
Chinese imports to the United States from China grew by 215%, increasing from some 14 million tyres in 2004 to almost 46 million tyres in According to the US, they more than tripled their share of the US market, growing from 4.7% in 2004 to 16.7% in 2008.
Labor Union
In April 2009, The United Steelworkers union filed a Section 421 trade case with the U.S. International Trade Commission seeking to more than halve the imports of consumer passenger tires from China in order to “stave off further job losses and increase market share for American tire makers.”
The union argued that the deleterious effects of China's sudden market prominence were clear: Domestic consumer tire production declined by more than 25 percent between 2004 and 2008, and the U.S. tire-making industry's domestic market share declined from 63 percent to less than 50 percent between 2004 and 2008.
It can be seen that the attempts by the Obama administration to reign in the importation of Chinese tires to the US was meant to curry favor with the labor unions for the Affordable Care Act

14. Peculiarities about the China-US Tire Dispute
Case of Many Firsts
The Role of the Labor Unions / United Steelworkers Union
China’s first loss in the WTO
WTO dispute in which a challenged safeguard was upheld
Accession protocol used as a defense
Case of Many First
First Instance in which a Union - the United Steelworkers Union - petitioned for the trade dispute, rather than businesses within an industry. In fact they opposed the increased tariff according ot many claims.
FIrst time China lost a case as a complaining party. To give you an idea of of how many cases China is involved in - it has been a complainant in 15, a respondent in 39, and a third party in 141.
First WTO dispute where a challenged safeguard was upheld. Safeguards aren’t generally looked at favorably by the WTO. The terms used to define safeguards avre very vague and so difficult to prove. WTO was deferential to the US.
The Justification of protectionism

15. Peculiarities about the China-US Tire Dispute
Meager Returns for Jobs and Trade
Other countries stepping in to fill the void left by Chinese
According to an article by Steve Charnovitz at GW law school and Bernard Hoekman at the World Bank, the imact on tire manufacting jobs was zero. In late 2009 jobs in tire industry were at 52,000 workers, and in 2011 they were also If anything it fell by some measures and definitoins of tire industry. They also say that economic evidence shows that after the imposition of the sageugaurd, the returns have been most like negative but meager at best. They show inneficency of tariffs.
In the void that was left by Chinese tires, other countries took advantage of the opening.

16. US Tire Importations (by country)

17. Takeaways
“This is a tremendous victory for the United States as well as for American workers and manufacturers. We have said all along that President Obama’s decision to impose duties on Chinese tires was fully consistent with our WTO obligations. A WTO panel agreed with us and now the Appellate Body has confirmed it...The Obama Administration will continue to fight for U.S. jobs and businesses. We will use our trade laws to stand up for our workers and address harm to them.”
-Ambassador Ron Kirk
“It was a protectionist measure and unsupported by the U.S. tire industry. The safeguard measure does not help reducing U.S. tire imports, but injures China’s legitimate trading interests,”
-Chinese Trade Envoy
“We are certainly disheartened that the president bowed to the union and disregarded the interests of thousands of other American workers and consumers.”
-Marguerite Trossevin
Counsel to the American Coalition for Free Trade in Tires

18. Takeaways
Trade restrictions on imports from one country are not effective unless restrictions are placed industry wide
A safeguard doesn’t necessarily mean an increase in jobs
The tariff and its effect on the American business and consumers
Retaliatory poultry tariff
The hazards of using tariffs to fight currency manipulations from another country
Trade restrictions on imports
other countries saw a significant increase in shipments to the United States after the safeguard.
The countries that appeared to be competing most directly with China on price were Indonesia and Taiwan. Both had average unit values of around $35 in 2009 and Together these two countries exported an additional 9 million tires in 2010, which was almost equal to the 11-million-unit decline experienced by China.
Korea and Mexico, two other countries that saw very large increases in exports to the United States, appeared to be selling somewhat higher-quality tires, with unit values averaging $54 in 2009 and 2010.
Safeguards point
Contrary to claims made by the Obama administration,we find that total employment and average wages in the tire industry were unaffected by the safeguard using the ‘synthetic control’ approach proposed by Abadie et al. (2010). Further analysis reveals that this result is not surprising as we find that imports from China are completely diverted to other exporting countries partly due to the strong presence of multinational corporations in the world tire market.
52k in 2009 jobs
52k in 2011 jobs
The employment numbers illustrate the inefficacy of a tariff to save or create jobs in an industry that is organized globally and that allocates production of different varieties of its product mix to countries that have a comparative advantage to produce them. A tariff instrument is unlikely to be useful in safeguarding a country’s competitiveness in a world of vertical specialization and global production. A targeted tariff may provide benefits to a discrete set of workers (see USW, 2012), but it will do so only if a country has an industry that produces the products at issue.
Tariff and its effect
The brunt of the tariff is felt by American workers and businesses involved in importing, trucking, wholesaling, retailing, and installing those Chinese-made tires.
2009 tire tariffs cost US consumers $926K per job saved and led to the loss of 3 retail jobs per factory job saved - One 2011 study has estimated that the cost to Americans from higher prices resulting from safeguard tariffs on Chinese tires was about $1.1 billion.
Presumably, this loss of purchasing power caused an indirect loss of jobs in the retail sector. Additionally, the tire tariff inspired a retaliatory tariff by China on U.S. poultry exports, resulting in a ninety percent decrease of exports from the United States to China. Thus, in attempting to stop the perceived harm from underpriced tire imports, the United States possibly inflicted more harm upon itself than was inflicted by China’s imports.
poultry and auto parts industries - antidumping duties immediately after the tire tariffs took effect
Tariffs to fight..
The usage of universal tariffs would likely cause more harm than good, as the United States is dependent upon imports. Country-specific tariffs might be effective, but carry significant risks of retaliation and trade-wars. Industry-specific tariffs carry fewer risks but operate on such a smaller scale that their ability to combat the problem is limited.

19. Final Thoughts Questions / Comments?

20. References
Charnovitz S. & Hoekman B. (2013). US–tyres: Upholding a WTO accession contract –
imposing pain for little gain. World trade review, 12(2), pp
World trade organization. (2017). Retrieved from
Reuters
USTR Website
JSPC Case Search
Law360
New York Times - Union Support for Tarrif on Chinese Tire Imports