GENEVA – The World Trade Organization ruled Friday that China had violated trade rules when it slapped punitive duties as high as 21 percent on American-made cars and sport utility vehicles.
The ruling was an enormous victory for U.S. automotive manufacturers, coming at a time of rising tensions between the U.S. and China on a range of strategic issues. It was the second time in two months that the U.S. has won a WTO case against China. In March, the WTO ruled that China had restricted trade by imposing export duties on so-called rare earth elements, the lightweight, superconductive minerals that are critical to a wide range of high-tech products.
Michael Froman, the U.S. trade representative, hailed Friday’s ruling, which will have the effect of cutting the cost of U.S.-made cars and SUVs imported for sale inside China.
The U.S. auto industry employs nearly 850,000 workers throughout the country, from Michigan to California.
“The message is clear: China must follow the rules, just like other WTO members,” Froman said. He promised to continue to press China to change trade practices “that unfairly restrict U.S. exports.”
The duties – fees that an importer must pay on items it wishes to sell inside China – were imposed in 2011 in response to a 2009 petition from Chinese auto manufacturers that U.S. automobiles with large engines were being sold at unfairly low prices.
One set of duties ranged from 2 percent to 21.5 percent of the value of the vehicle, while another set ranged from 6.2 percent to 12.9 percent. They were applied to vehicles with an engine capacity of 2.5 liters or greater and affected popular American SUVs, including the Jeep Grand Cherokee, the Buick Enclave, the Cadillac Escalade and others.
The U.S. complained that the duties had been imposed simply to hurt American sales. China is the second-largest export market for U.S. autos, after Canada, accounting for 13 percent – $8.5 billion – of U.S. auto exports.
“This is about jobs,” said Sen. Debbie Stabenow, D-Mich., in praising the WTO’s decision. “Today’s ruling is a major victory for American workers and manufacturers and another blow to China’s continued illegal trade practices. It is long past time China recognize that its repeated attempts to flout the rules will not be tolerated.”
China claimed during the panel’s proceedings on the U.S. complaint that it had ended collecting the duties on Dec. 15 and that therefore the panel had no basis to reach a decision. But in its decision, the panel said that China had presented no proof the duties have been repealed. “As far as the official record of this dispute is concerned, we are not in a position to find that the measures have been terminated,” the panel wrote.
Both China and the U.S. have the right to appeal the panel’s findings.