U.S. Trade-Case Win Against China Contributes to Tensions

China’s duties on autos imported from the U.S. violated global trade rules, the World Trade Organization said in a ruling that adds to mounting commercial tensions between the world’s two largest economies.

China improperly imposed tariffs on imported vehicles, including those made by General Motors Co. and Chrysler Group LLC, the WTO, a Geneva-based trade arbiter, ruled in a decision issued today. China added the duties in 2011, after the U.S. government bailed out the automakers during the global financial crisis, and eliminated them in December.

“This is a significant victory,” U.S. Trade Representative Michael Froman said today at a press conference in Washington. “It’s time for China to change the practices that have led the United States and our trading partners to bring these kinds of cases.”

The U.S. this week dramatically escalated the trade battle with China, accusing five military leaders of stealing corporate secrets. The indictments follow complaints over issues such as tires, chicken parts, clean-energy products and credit-card payment services.

“This is more than a humdrum case,” Representative Sander Levin of Michigan, top Democrat on the House Ways and Means Committee, said today in appearing with Froman and Senator Debbie Stabenow, also a Michigan Democrat. “There’s been a vindication of the importance of having a rule of law in international trade.”

Technical Matters

The Chinese Embassy in Washington in a statement claimed victory on some technical aspects of the case.

“We noticed that the panel report rejected part of the United States’ argument” that China failed to define the domestic industry, Geng Shuang, the spokesman, said in an e-mail. He said China had a “reservation” with other elements of the ruling.

In response to a 2012 U.S. complaint, the WTO found China failed to show how the goods harmed the Chinese market and didn’t disclose to U.S. companies how the tariffs were calculated, the U.S. trade office said, citing a ruling by the Geneva-based arbiter.

Cars, SUVs

China imposed duties, as high as 21.5 percent, on U.S.-made cars and sport-utility vehicles in December 2011, claiming the goods benefited from government subsidies and were sold in China for market below value, known as being “dumped.” The tariffs followed the forced bankruptcy and government bailout of GM and Chrysler, now a unit of Italy’s Fiat SpA in 2010. The U.S. challenged the duties in 2012.

“We commend both countries for utilizing the WTO’s process to resolve a trade dispute,” Heather Rosenker, GM’s director of public policy and government relations communications, said in an e-mail.

Ford Motor Co., which didn’t receive U.S. assistance in the bailout, didn’t export vehicles to China during the investigation period and wasn’t subject to the tariffs, company spokeswoman Christin Baker said in an e-mail.

The value of the goods at issue -- including Chrysler’s Jeep Grand Cherokee, and GM’s Buick Enclave and Cadillac Escalade -- were worth about $5.1 billion last year, according to the U.S. trade office. China is the second-largest export market for U.S. autos, the agency said in a statement.

Second Case

In September 2012 the U.S. filed a separate WTO case against China alleging the Beijing government subsidized its own auto and auto-parts makers in violation of global trade rules. That case is still under review, according to the U.S. trade office.

The decision on the autos is the third recent victory for the U.S. in challenging China’s anti-subsidy and anti-dumping practices, after decisions related to poultry and steel, the trade office said in its statement.

Since 2009, the U.S. has filed 17 cases at the WTO against China and other nations, including Indonesia and India, according to the agency. The U.S. doubled the rate of filings against China during that time.

“This announcement is a major victory for U.S. automakers,” Representative Dave Camp, a Michigan Republican and chairman of the House Ways and Means Committee, said in a statement. “We must continue to enforce our trade rights in the WTO to ensure that countries like China do not unfairly discriminate and retaliate against U.S. products.”

Before it's here, it's on the Bloomberg Terminal.