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Cablegate: Ambassador Meets Mofcom Chen to Discuss Tires

VZCZCXRO0473
OO RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2441/01 2371130
ZNR UUUUU ZZH
O 251130Z AUG 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5779
INFO RUEHOO/CHINA POSTS COLLECTIVE IMMEDIATE
RUEHGV/USMISSION GENEVA IMMEDIATE 2532
RUCPDOC/DEPT OF COMMERCE WASHDC IMMEDIATE
RHMFIUU/DEPT OF ENERGY WASHINGTON DC IMMEDIATE
RUEATRS/DEPT OF TREASURY WASHINGTON DC IMMEDIATE
RHEHNSC/NSC WASHDC IMMEDIATE

UNCLAS SECTION 01 OF 02 BEIJING 002441

SENSITIVE
SIPDIS

STATE FOR E, EAP, EAP/CM
STATE FOR H/BETSY FITZGERALD, EAP/CM SHAWN FLATT, EEB/TPP
CLAYTON HAYS, SCA/RA JOHN SIPLSBURY
STATE PASS USTR FOR TIM STRATFORD, ANN MAIN, JEAN GRIER
DOC FOR IRA KASOFF, NICOLE MELCHER (5130), MAC (4420)
TREASURY FOR OASIA/DOHNER/WINSHIP
GENEVA PASS USTR
NSC FOR LOI

E.O. 12958: N/A
TAGS: ETRD EFIN ECON PREL WTRO CH
SUBJECT: AMBASSADOR MEETS MOFCOM CHEN TO DISCUSS TIRES

REF: A. BEIJING 2299
B. STATE 85673
C. BEIJING 2439

1. (SBU): SUMMARY: During his August 22 meeting with
Ambassador Huntsman, Minister of Commerce Chen Deming
expressed concern about the possible use by the United States
of the special safeguard protection measures against imports
of Chinese-produced passenger car tires. Chen said that if
the USG "employed" the safeguard, it would open the door to
the rest of the world doing the same. Many other countries,
Chen continued, had previously thought to use special
safeguards against China, but had not. This case was not
really about bilateral trade or the protection of domestic
Chinese workers or companies. Rather it was about the
devastating effect it could have on global trade. Although
leaders of both nations were facing numerous political
pressures, they must, Chen emphasized, honor promises made at
the G20 summit in London to avoid implementing any
protectionist measures before the end of 2010. Ambassador
Huntsman said that President Obama had given him specific
instructions to maintain a "positive, collaborative and
comprehensive" relationship with China. He promised to pass
Chen's concerns on to Washington, and noted that both
countries needed to avoid protectionist measures that could
thwart economic recovery. Further, the Ambassador noted that
the U.S. and China must anticipate problems and work hard to
resolve them together. Economic recovery and growth in Asia
and the world depended on our ability to avoid trade wars and
friction. END SUMMARY.

PREVIOUSLY RAISED CONCERNS REPEATED
-----------------------------------

2. (SBU) In addition to the central worry of inciting an
avalanche of discriminatory measures against China, Chen
restated several points that we have heard in recent days:
- No U.S. administration has ever used a special safeguard
protection measure against China;
- The special safeguard protection itself is an ambiguous
tool followed closely by Chinese media and "netizens" who
might react with considerable displeasure to being hit by the
"trade atomic bomb";
- Losses to the United States resulting from such a measure
would far exceed the gains to the U.S. tire workers;
- U.S. tire producers did not necessarily support the measure;
- U.S. soybean exports were vulnerable to Chinese
anti-dumping measures as measured by rapid increases in
volume and price;
- China had honored the consensus reached by the G20 in
London not to employ trade protectionist measures before the
end of 2010, and;
- the U.S. is not ready to negotiate further due to the lack
of the deputies at both the Department of Commerce and USTR,
as well as the lack of a U.S. ambassador to the WTO in Geneva.

A LITTLE CONTEXT PLEASE
-----------------------

3. (SBU) Chen went on to claim that he understood the
political pressures U.S. leaders faced at home. Just the day
before, Chairman of the House Foreign Relations Committee
Howard Berman had warned Chen that protectionist sentiment
there is stronger than ever because of the economic slowdown
and unemployment. Moreover, as he addresses health care
reform, President Obama "depends on the contentment of the
Congress," that, in turn, faced mid-term elections later next
year. Given this context, Chen said that his government
would refrain from making any unreasonable requests, but
would ask the Administration to consider the strategic
relationship between the U.S. and China in order to avoid a
bilateral trade war.

4. (SBU) Chen claimed that MOFCOM had received numerous
petitions from various Chinese industries seeking
protectionist measures against U.S. imports. The auto
industry was asking for protection because of U.S. subsidies

BEIJING 00002441 002 OF 002


to exporters of cars to China. The Chinese chicken industry
was discontented because the United States not only banned
imports of Chinese chicken, but then went ahead and exported
chicken to China. Finally, Chinese industry was complaining
about U.S. imports of integrated circuits and aircraft.

END ON A POSITIVE NOTE?
-----------------------

5. (SBU) Chen concluded the meeting with a discussion of
U.S.-Chinese cooperation to advance trade talks at the Doha
Round. He pointed out that many countries are trying to
force the United States to clarify its positions. Although
he was confident the U.S. economy will see significant
recovery by the end of this year, China believed the U.S.
needed more time for economic recovery.

6. (SBU) Separately, the Ambassador noted that President
Obama would be in China soon and would discuss the importance
of bilateral relationship and the need to avoid harmful
confrontation.
HUNTSMAN

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