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United States Wins Trade Enforcement Case Against China On Autos

WTO Panel: Duties on American-made autos unjustified; findings will help
level the playing field for U.S. auto workers and manufacturers 

Washington, D.C. – United States Trade Representative (USTR) Michael Froman announced today that the United States has won a major case at the World Trade Organization (WTO) on behalf of U.S. auto manufactures and the nearly 850,00 American automotive industry workers around the country, from Michigan to Ohio to California.  A WTO dispute settlement panel agreed with the United States that China’s imposition of antidumping duties (ADs) and countervailing duties (CVDs) on American-made cars and sport-utility vehicles (SUVs) breached numerous international trade rules.  This report marks the third recent WTO challenge that USTR has brought and won on China’s misuse of ADs and CVDs in an ongoing effort to ensure that America’s working families are able to seize all of the job-supporting opportunities available under U.S. trade agreements.

“Once again, the United States has prevailed in a dispute concerning China’s unjustified use of trade remedies, this time on exports of U.S.-made cars and SUVs.  This win for American auto workers and manufacturers is an important example of how President Obama has focused his trade agenda on supporting jobs, growth and a strengthened middle class in America,” said Ambassador Froman.  “USTR is working day and night to unlock economic opportunity for U.S. workers, farmers, and businesses by helping them sell more Made-in-America exports to the world.  Americans deserve to compete on a fair and level playing field, and we will never stop fighting to ensure that our trading partners live up to the commitments they made in our international trade agreements.”

Ambassador Froman continued, “This is the third time that the United States has prevailed in a WTO dispute challenging China’s unjustified use of trade remedies.  Each time, a WTO panel of experts has made clear that China had no basis whatsoever for imposing duties on American goods.  The message is clear: China must follow the rules, just like other WTO Members.  USTR will keep pressing for China to change its trade remedies practices that unfairly restrict U.S. exports.”

“I applaud today’s decision, which supports U.S. automakers and other U.S. exporters that have been forced to bear the burden of China’s opaque trade remedy system,” said Secretary of Commerce Penny Pritzker.   “The Department of Commerce conducts antidumping and countervailing duty proceedings in an open, transparent and fair manner and we expect the same from our trading partners.  We will continue to work closely with USTR to make sure that all of our trading partners play by the rules in order to help provide U.S. firms and workers a level playing field on which to compete with their international competitors.”

“This is about jobs,” said Sen. Debbie Stabenow (D-MI).  “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.   I want to thank the Obama administration for standing up to China and fighting against illegal trade practices to ensure that we continue to export our products, not our jobs. Strong enforcement actions like this one are essential to the ongoing resurgence of American manufacturing.”

“Today’s WTO ruling confirms what we’ve known for a long time: that China’s antidumping and countervailing duty cases against U.S. vehicle exports were without merit,” said Sen. Carl Levin (D-MI). “It is laughable for China, the biggest dumping perpetrator in the world, to claim that U.S. vehicle exports are being sold in China below the cost of production when they are obviously not. Hopefully now there will be a renewed effort to open China’s markets to our products and the WTO will move quickly to rule on the pending cases against China’s trade barriers.”

“Today's outcome is a significant victory in the fight against China's practice of retaliating and intimidating those who dare to stand up to it,” said Rep. Sandy Levin (D-MI). “The United States will not shy away from enforcing U.S. trade laws, and we certainly won't tolerate the intimidation that China demonstrated in starting the investigation challenged in this dispute. The Obama Administration is to be commended for its activist and determined pursuit of both objectives on behalf of U.S. workers and businesses.”

In 2013, the United States exported $64.9 billion of autos, with $8.5 billion of those exports, or 13 percent of the total, going to China.  China is now the second largest export market for U.S. autos, after Canada.  China’s unjustified duties, which ranged up to 21.5 percent, affected an estimated $5.1 billion worth of U.S. auto exports in 2013, and were applied to well-known models such as the Jeep Grand Cherokee, Buick Enclave, Cadillac Escalade, and many others.

This is the third of three recent WTO disputes in which the United States has challenged serious flaws in MOFCOM’s administration of China’s AD and CVD laws.  The two earlier disputes concerned U.S. specialty steel products and chicken broiler products.  The United States has now prevailed in all three disputes.    

Attorneys from the Monitoring and Enforcement unit of USTR’s Office of General Counsel and other USTR staff worked closely with staff from the U.S. Department of Commerce and the U.S. International Trade Commission in preparing and litigating this case.  

Background:

To view a Fact Sheet on this enforcement case, please click here.

Shortly after President Obama decided in September 2009 to impose a safeguard measure against Chinese tire imports, MOFCOM announced that it would initiate AD and CVD investigations of imports of American-made cars and SUVs.  MOFCOM initiated those investigations two months later.  In May 2011, MOFCOM issued final determinations in which it found that imports of American-made automobiles had been sold at less than fair value (i.e., “dumped”) into the Chinese market and had also benefited from subsidies.  In December 2011, China began imposing both AD and CVD duties on imports of American-made automobiles.  The AD duties ranged from 2.0 percent to 21.5 percent, and the CVD duties ranged from 6.2 percent to 12.9 percent.  The specific products affected by the duties are American-made cars and SUVs with an engine capacity of 2.5 liters or larger.

On July 5, 2012, the United States requested dispute settlement consultations with China concerning the conduct and results of MOFCOM’s AD and CVD investigations.  After consultations proved unsuccessful, the United States requested that the WTO establish a panel to hear U.S. claims that China breached numerous procedural and substantive obligations under the WTO’s Antidumping Agreement and Agreement on Subsidies and Countervailing Measures. 

In its report, the Panel found in favor of the United States on nearly all U.S. claims. 

Specifically, with regard to MOFCOM’s substantive errors, the Panel found that China breached its WTO obligations by:

  • improperly determining that U.S. exports were causing injury to the domestic Chinese industry;
  • improperly analyzing the effects of U.S. exports on prices in the Chinese market; and
  • calculating the “all others” dumping margin and subsidy rates for unknown U.S. exporters without a factual basis.

With respect to procedural failings in the MOFCOM investigations, the Panel found that China breached its WTO obligations by:

  • failing to disclose essential facts to U.S. companies, including how their dumping margins were calculated; and
  • failing to provide non-confidential summaries of Chinese submissions containing confidential information.

See a copy of the Panel’s report here.

In December 2013, after the parties had submitted all of their submissions and hearings had taken place before the Panel, but before the Panel had issued its decision, China’s Ministry of Commerce (MOFCOM) announced the termination of the AD and CVD duties on American-made cars and SUVs.  The United States requested that the panel issue its report to ensure that the WTO would adopt findings that China’s duties are inconsistent with WTO rules and also because the conduct and actions being challenged in this dispute are representative of a continuing pattern of disregard for WTO rules by China’s investigating authority. 

The United States may request adoption of the panel report by the WTO’s Dispute Settlement Body.  Both parties have the right to appeal issues of law or legal interpretation in the panel report to the WTO Appellate Body.