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Tire tax would weaken Sino-US trade
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China warned Tuesday that US tariffs on Chinese tires would damage the mutually beneficial trade relationship between the two economic powerhouses.

"The (tariffs) will certainly impact trade between China and the US because we have a huge trade volume," said Vice-Foreign Minister He Yafei at a briefing Tuesday on President Hu Jintao's participation in next week's G20 summit in Pittsburgh.

He blasted the tire tariffs as "clear examples of protectionism," reiterating a similar denouncement from other Chinese officials.

US President Barack Obama recently approved a three-tier tariff system on all imports of passenger vehicles and light truck tires from China for three years.

In the past two days, officials from both sides have made it clear that they are not in favor of trade protectionism and are making efforts to come to an understanding.

Earlier Tuesday, Yao Jian, spokesman for the Ministry of Commerce, expressed the nation's unwillingness to see a "trade war" and proposed that the two sides conduct consultations under WTO's legal framework.

Obama downplayed the possibility that the tariffs would spark a cycle of retaliation and told US media outlets on Monday that "we're not going to see a trade war."

But Yao argues that since the global financial crisis arose out of the US' economic downfall, it should act cautiously and refrain from the use of trade remedies.

Vice-Foreign Minister He said that participating nations in the G20 summit in Pittsburgh should promise not to erect new trade protectionist measures.

"The G20 could make a major contribution if it were willing to take on some of the tough issues," said Gregory T. Chin, an assistant professor at the York University in Toronto, adding that if these trade matters between the US and China are not properly addressed, "we all risk heading toward a world of increasing geo-economic and interstate rivalry."

Eswar Prasad, a professor of trade policy at Cornell University and a former head of the IMF's China desk, said that the heightened trade tensions could also hinder progress on important multilateral initiatives, including tackling climate change, handling nations like North Korea, and promoting reform of the international financial institutions.

"The actions by the US and China suggest that both sides are taking a tougher stance on trade issues, which could make their relationship more complicated and contentious," Prasad said.

Hubert Tse, a Shanghai-based lawyer, told China Daily that it will be very challenging for China to overturn the US tire tariff approval.

Although China filed a formal request on Monday for consultations with the US through the World Trade Organization over the tire tariffs - giving the two countries 60 days to resolve the dispute through consultations - Tse believes the punitive tariffs will still be imposed on Chinese tire imports.

"I suspect nothing will come out of the consultations between China and the US as China has already discussed their views and their opposition to the tire tariffs with the US, prior to the Obama decision," Tse said.

If Tse's prediction are correct, China has already drawn up backup plans.

"We will proceed with bilateral dialogues in dispute settlement, will endorse new measures to support China's tire industry and to help them become more competitive," Yao said.

(China Daily September 16, 2009)


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