U.S. Trade Representative Ron Kirk Praises Action Against Airbus

In a high-profile legal battle regarding European support for aircraft manufacturer Airbus, U.S. Trade Representative Ron Kirk praised U.S. efforts to declare such support illegal under world trade rules, despite the World Trade Organization ruling that the European loan mechanism, challenged by the United States, was legal.

Still, Kirk emphasized that "[t]his agency has worked long and hard to make the case that the loans and other subsidies provided to Airbus are inconsistent with WTO rules." Not in a position to offer details, Kirk further stated in a letter that "[t]he administration is not in a position to disclose publicly the content of the interim report in this dispute."

While Kirk did not explicitly character the WTO decision as a U.S. victory, Senator Patty Murray took it a step further. "This ruling is much more than a confirmation that Airbus has been breaking the rules. It is a victory for American workers who have been producing the best planes, but have been fighting an uphill battle."

Murray, whose state is home to Boeing's biggest manufacturing facilities, said she has urged President Barack Obama "to take the strongest possible actions to prevent European governments from providing Airbus further with an additional illegal trade-distorting subsidy."

The Stomp of the Chicken Feet

After President Obama's decision to levy tariffs on Chinese tires, chicken feet became the latest focus in the escalating U.S.-China trade war. The Chinese announced that they were considering import taxes on automotive products and chicken meat, a development that some trade experts feared could grow into a full-blown trade war in the midst of the Great Recession.

American executives expressed concern about losing what recently has become the largest export market for their chickens, one that is expanding rapidly as the Chinese population grows more affluent and consumerist. However, the executives also expressed relief Chinese importers are wanting to maintain current import levels to satisfy large consumer demand.

At a time when feed prices are high and domestic chicken sales to restaurants are down because of the recession, the Chinese market is important to the industry. Exports of American poultry totaled $4.34 billion last year, out of which, $854.3 million worth of chicken meat, less than 2 percent of total revenue by the American chicken industry was exported to China and Hong Kong. While the sum may seem miniscule, the U.S. industry emphasized that exports to China are very profitable.

About half of the chicken parts sold to China are wings and feet, which are worth only a few cents a pound in the United States. As delicacies in China, they fetch 60 cents to 80 cents a pound, a price that no other foreign market comes close to matching, according to industry experts.

China appeared to be ready to cut off imports of American chicken products in July, and American poultry producers said the issuance of import permits slowed temporarily, only to pick back up since then.

In an effort to calm Beijing's retaliatory mood, American poultry producers have emphasized that they have nothing to do with the Congressional import ban and say they do not fear competing with Chinese canned or frozen chickens.

“We believe in free and open trade and we feel our industry has a lot more to lose by being an obstructionist in trade than in supporting China’s position,” said James H. Sumner, president of the U.S.A. Poultry and Egg Export Council.

Two weeks ago, Mr. Sumner’s group and the National Chicken Council joined other American food organizations in sending a letter to Ron Kirk, the U.S. trade representative, warning that action against Chinese tires could lead to retaliation, stating that “[f]or some, the Chinese market is the difference between profitability and possible bankruptcy.”

Now that the Chinese are threatening retaliation, industry officials remain hopeful, taking into account the insatiable Chinese demand for chicken feet.

The U.S.-China Debacle: A Looming Trade War?

On September 11, the Obama Administration imposed tariffs of 35% on vehicle tires imported from China. Obama defended the tariffs, justifying them on the basis of enforcement of existing trade treaties between the two nations, arising under international trade law. A safeguard petition was filed to protect U.S. tire producers from surging imports from China. Observers in the trade and business industries consider the act to be purely political. Obama promised trade protections to various interest groups, including the steelworkers union, a key political ally of Obama and representing 15,000 employees at 13 tire plants in the United States. Supporters of the petition argue that Chinese manufacturers are pricing their tires far below market rates, thus harming U.S. manufacturers.

The U.S. International Trade Commission (ITC) recommended that Obama impose tariff duties for three consecutive years, commencing at 55%. A tariff this high would effectively block tire imports from China. According to the ITC however, all of the U.S. tiremakers have operations in China, and none of the companies have publicly supported the steelworkers complaint. Further, Chinese officials and lobbying groups for multinational companies such as Microsoft Corp., Citigroup, Inc., and Caterpillar, Inc., have pressed Obama to resist imposing tariffs, stating that it would result in a "downward protectionist spiral." Additionally, Chinese tires amount to 17% of all tires distributed in the U.S. and are lower-priced, causing concern among businesses and consumers alike.

China responded swiftly to the U.S. decision by filing a complaint with the World Trade Organization. China also commenced an investigation alleging dumping of U.S. auto and chicken products in the Chinese market, a prelude to what will likely be the imposition of tariffs on the sale and distribution of such goods.

Whether this debacle will serve as the prelude to a trade war remains to be seen. One one hand this episode may simply serve as bargaining positions at the G-20 trade meeting in Pittsburgh. On the other hand, it may be a genuine disagreement over China's manipulation of its currency. Still, as two economic powerhouses with deeply intertwined economic interests, the U.S. and China cannot afford to let political shortsightedness obstruct sound economic policy.

In related news, the U.S. House has narrowly passed environmental legislation which would impose tariffs on Chinese environmental goods. The American Clean Energy and Security (ACES) Act would require the U.S. to cut greenhouse gas emissions 17 percent by 2020 and 83 percent by 2050. The legislation would establish a "cap-and-trade" system that would put a value on emissions permits, giving industries an incentive to cut pollution. A specific provision in the legislation would require the U.S. Environmental Protection Agency to calculate "appropriate amounts" of emissions "allowances" for cheaper imports from countries that do not impose greenhouse gas limits. In effect, the result would be a tariff on Chinese goods if the country continues to resist mandatory caps on emissions. Supporters argue that an "equal-playing field" should exist between the U.S. and China with regard to emissions. Opponents argue that such legislation, if passed, will only compel China to impose retaliatory measures while avoiding any cuts to its emissions.

The question of tariffs is particularly sensitive when considering China's relentless purchase and investment of U.S. Treasuries, debt financing, corporations and domestic real estate. With the economic health of both nations interdependent, an exchange of tariffs is viewed as moot.

Sheheryar T. Sardar, Esq. is a Partner at Sardar Law Firm LLC. He can be reached at 631.838.0178 and sardar@sardarlawfirm.com.