Victory in China Chicken Case Seen Aiding U.S. Trade Wars

The Obama administration declared victory after the World Trade Organization ruled China unfairly penalized imports of U.S. poultry, and said the decision should stop other nations from trying to thwart its exports.

China’s duties and tariffs on chicken legs and other parts violated WTO rules, the Geneva-based trade arbiter said in a decision yesterday. China must drop the duties within 60 days, or appeal.

“WTO members must use trade remedies strictly in accordance with their commitments, and we hope that this win will discourage further violations that hurt American exporters,” U.S. Trade Representative Michael Froman said in a statement.

U.S. poultry exporters including Tyson Foods Inc., Sanderson Farms Inc., and Pilgrim’s Pride Corp., a unit of JBS SA of Sao Paulo, Brazil, had backed the case.

The ruling is a setback for China as the Obama administration challenges the nation over its trade actions. The U.S. and China -- the world’s largest economies -- have sparred on issues including clean-energy technology, autos and rare-earth elements in recent years. The poultry decision settles a two-year-old dispute, unless China appeals the final ruling from the WTO dispute settlement panel.

“This is a good example of our whole-of-government approach we’re taking to opening markets and enforcing our trade laws,” Froman said yesterday at a press conference with Commerce Secretary Penny Pritzker and Agriculture Secretary Tom Vilsack.

Two Years

Officials from the Chinese embassy in Washington didn’t respond to phone and e-mail requests for comment. The nation’s Ministry of Commerce will evaluate the report and carry out necessary measures, the official Chinese Xinhua News Agency reported.

China imposed the sanctions, of as high as 105.4 percent of the price of the goods, in 2010. The U.S. filed its WTO complaint against the tariffs in September 2011.

The WTO decision “supports our view that these duties on chicken exports to China aren’t justified,” Worth Sparkman, a Tyson spokesman, said in an e-mailed statement. “However, we recognize this is the first step in what could be a continuing process at the WTO.”

Tyson of Springdale, Arkansas, is the largest publicly held U.S. chicken producer. The domestic industry last year exported to China more than 240,000 metric tons of broilers valued at $283.4 million, according to the USA Poultry & Egg Export Council.

Recordkeeping Disputes

Trade officials in President Barack Obama’s administration had been concerned that other nations were rejecting the recordkeeping of American companies and using their own methodologies to consider whether products have been sold below cost, also known as dumping, Froman said.

“China had adopted this flawed approach, and the WTO panel found that China breached WTO rules,” he said. “This is a significant win for American chicken producers.”

U.S. officials said the WTO ruling will help poultry producers regain market share in China. Exports of the broiler products, which include chicken wings and leg quarters, fell 80 percent after the duties took effect, according to the U.S. trade office.

The tariff on products other than chicken feet, also known as paws, made shipping to China “economically unfeasible,” according to Mike Cockrell, chief financial officer of Sanderson Farms, said in a phone interview. The Laurel, Mississippi-based company stopped exporting other chicken products such as dark meat, he said.

Cockrell said China may become a good market for dark meat if the ruling stands and the country removes the tariffs.

The WTO panel circulated its findings to the U.S. and China in June, upholding an interim report from the previous month that said China had imposed the duties against international trade standards, Bloomberg BNA reported last month.

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