Obama's Chance To Stand Up To China

President Obama will get an opportunity in the coming weeks to show American workers that he has the mettle to get tough with China when that country flouts the basic principles of fair trade, and it will be on an issue in which he does not have the luxury of ambiguity.

Last week the International Trade Commission ruled [1] that Chinese automobile tire imports were at a level that would "cause or threaten to cause market disruption" in the U.S. market. That ruling sets the stage for the commission to propose remedies on June 29 intended to reduce the number of Chinese tires imported into the United States. Those remedies would then be presented to President Obama on July 9, and the administration would have until early September to decide whether to accept or reject them.

While there has been ample media attention on the woes of the domestic auto industry, the devastation of the domestic tire industry has been happening largely under the radar. But the trends are stark. Total U.S. tire production capacity declined from 325 million in 2005 to 280 million in 2009 due to plant closings. This year, according to the Alliance for American Manufacturing [2], eight additional U.S. tire manufacturing plants employing 8,000 workers are scheduled to be closed. Meanwhile, Chinese tire imports to the U.S. have increased 215 percent since 2004, with 46 million tires worth $1.7 billion in sales being sold in the U.S. in 2008.

According to data compiled by the trade commission [3], in one category—16-inch passenger-car tires—imports went from 1.4 million in 2004 to 10.4 million in 2008. The price per tire in 2008—$40.36—was significantly below the average price of tires imported from other countries, $49.30.

The manufacturethis.org blog [4] wrote, "As with so many other manufactured products from China, its tire industry benefits from illegal government subsidies, exploited labor and intentional undervaluation of its currency. Because of its cheating, its tires are cheaper and U.S. tire manufacturers—who obey laws and regulations—can’t fairly compete."

One of the plants featured in news stories reviewed as part of the ITC ruling is a Michelin plant in Opelika, Ala. that also makes tires under the BF Goodrich and Uniroyal brand names, among others. In 2006, the plant announced that it would cut production 30 to 40 percent. At the time, a trade publication, RubberNews.com, reported [5]:

BFG cited overcapacity in the mass-market passenger tire segment in North America as the impetus for the reductions. The segment has been shrinking over the past several years and is experiencing intense cost pressure because of increased imports from competition in lower-cost countries, the company said. ...

[Ron Hoover, United Steelworkers Union executive vice president] echoed [Tim Williams, vice president of United Steelworkers Local 753] in saying productivity never has been a problem in Opelika, and added the facility has one of the best cost-per-unit rates in the company. The real problem is BFG can´t in turn sell those tires for very much money, he said. ... [T]he glut of imports from low-cost locations such as China has resulted in several companies abandoning lower-margin tire production in North American facilities, he said. Most of those moves directly affect USW members.

The hope of labor leaders there was that the plant's remaining jobs could be saved by shifting to higher-end tire production. But in April, RubberNews.com reported [6] that the Opelika plant will close on October 31, a casualty of the recession as well as the flood of imported tires.

While it is true that the $760 billion worth of U.S. debt that China currently holds gives the country a certain amount of leverage over the United States, two things remain true. Number one, rules are rules. Trade agreements prohibit countries from subsidizing industries for the purpose of undermining manufacturing in other countries and eventually monopolizing those markets. Second, the fate of China's economy is inextricably linked to the health of the U.S. economy, which can never be fully restored as long as its manufacturing sector, and the middle-class jobs that sector provides, remains crippled.

President Obama will be under considerable pressure to follow the pattern of President Bush, who ignored every recommendation for relief that the trade commission issued. We are living with the results of that policy: a loss of more than 3 million manufacturing jobs and the most anemic period of economic growth in terms of job production and increased middle-class living standards since World War II. While the failure of that policy direction is clear, the power of the business lobbies and conservative "free-trade" ideologues to drown out the voices of advocates for fair trade—not "protectionism," which China is clearly guilty of, but playing by rules that allow the best, most efficient companies to win—is formidable. To set the political stage for President Obama to do the right thing, labor and other progressives should work together to make sure that the interests of workers are front and center of a trade policy discussion that must have a much higher profile in the coming days.