China unveiled data on Tuesday that showed tire exports to the United States actually fell in the first half of 2009, rebutting Washington's accusations it had breached its WTO agreements by flooding the U.S. market.
Both countries moved to allay concerns of a trade war, but the row over Washington's decision to impose added duties on Chinese-made tires showed no signs of abating as Beijing said the U.S. move was sending the wrong message to the rest of the world.
"We mainly think that it's an abuse of safeguard measures," China's commerce ministry spokesman Yao Jian told reporters.
"It is sending a wrong message to the world under the current situation that the global financial crisis is still spreading."
The tire duty was the first time Washington has applied special "safeguard" provisions Beijing agreed to before joining the World Trade Organization in 2001. Safeguards can be invoked if a surge in imports hurts U.S. manufacturers, and once invoked on a specific product, can also be applied by other countries.
China promptly said it would seek consultations with the United States over the duties, a preliminary step toward seeking a WTO ruling on the measures.
Mr. Yao objected to U.S. claims that a surge in imports were harming American industry and jobs, saying that Chinese shipments had fallen off and that globalization means barriers to Chinese imports would not guarantee U.S. jobs.
Chinese statistics show that tire exports to the United States rose by 2 per cent in 2008, and fell by more than 15 per cent in the first half of 2009, Mr. Yao said.
"Under these circumstances, the conclusion that China's exports are distorting the U.S. market does not stand," Mr. Yao said, pointing out that U.S. tire manufacturers had not joined the complaint, which was brought by the United Steelworkers union.
"If the U.S. only cares about the jobs of 5,000 workers while harming a large number of innocent others, and if the U.S. only cares about its own jobs regardless of jobs in China, a developing country, I really think that's not fair."
The United Steelworkers union said a tripling of Chinese tire imports from 2004 to 2008 had cost more than 5,000 U.S. jobs.
The U.S. trade deficit with China totalled $103-billion (U.S.) in the first half of 2009, down 13 per cent from last year but it has grown considerably over the last decade. The imbalance is a source of much ire in Washington.
Trade War Can Be Avoided
The U.S. imposition of duties comes as the global crisis curtails demand and narrows manufacturers' margins world-wide.
Zhang Hanlin, head of the China Institute for WTO Studies in Beijing, said U.S. tire makers were suffering from a drop in demand due to the economic crisis, not Chinese competition.
"The current problems of the U.S. tire, automobile and steel sectors are not due to China," Mr. Zhang said.
Chinese car makers and auto parts makers could become increasingly competitive in export markets, as their capacity exceeds domestic demand. That could threaten the traditional manufacturing base of European and American auto firms, many of whom initially invested in China to benefit from Chinese growth.
Of the tires exported from China, 68 per cent were from foreign-invested plants, Yao said.
U.S. President Barack Obama said that if the United States didn't enforce the rules that were contained in its trade agreements, "then it's very hard to have credibility". But he added he was sure a trade war could be averted.
"I'm not surprised that China's upset about it," Mr. Obama told CNBC television. "But keep in mind we have a huge economic relationship with China. But I just want to make sure that if we actually have rules written down, they mean something."
Larry Summers, director of Mr. Obama's National Economic Council, said Washington had tried but failed to negotiate a solution.
China has so far shown no signs that the trade disagreements would spill into other issues of international co-operation, such as North Korean or Iranian nuclear negotiations.
"We don't want to see a negative impact on our bilateral trade relations due to the frictions, especially those stemming from the U.S. abuse of safeguard measures," Mr. Yao said.
China has launched its own investigation into chicken parts and automotive imports from the United States. It says the U.S. products targeted by Beijing's anti-dumping inquiries are roughly equal in value to China's tire exports to the United States - about $2-billion a year.
The two countries have vowed to co-operate in trying to revive global economic growth, but trade friction could spill into a G20 summit in Pittsburgh this month. Mr. Yao said China would reiterate its opposition to protectionism at the summit.