On Monday, The International Trade Commission (ITC) unanimously voted to recommend that President Obama impose tariffs on the import of Chinese tires for three years. The new administration will have until September 17 to decide what, if any, relief to provide based on the ITC’s recommendation. Will Obama cave to the power of business lobbies and conservatives to follow in the footsteps of President Bush, or support a policy that will help our long term economy?
Chinese tires are one of the many goods that flood the US market because China manipulates its currency and unfairly subsidizes its manufacturing sector. Illegal government subsidies combined with exploited labor and the undervalued Yuan contribute to China’s ability to flood U.S. markets with cheap products, rendering domestic industry uncompetitive.
Tire imports to the U.S. from China have increased since 2004, with 46 million tires worth $1.7 billion being sold in the U.S. in 2008, making the tire industry another example- other than the ubiquitous “Made in China” label on your t-shirts - of this policy. In January, Secretary of the Treasury, Tim Geithner, delighted American trade unions when he bluntly asserted that China has been manipulating the Yuan, stating that the new administration plans to act "aggresively" employing “all the diplomatic avenues’ to change China’s currency practices.
Monday’s recommendation’s resulted from the efforts of industry groups who petitioned the International Trade Commission (ITC) under section 421, a safeguard provision that is designed to combat the influx of cheap Chinese products that make U.S. competition difficult. In April, the Section 421 Market Disruption Investigation on Tires from China was announced by the ITC. The ITC recommended that President Obama impose tariffs on the import of Chinese tires for three years: "55 percent ad valorem (the value of the item) in the first year, 45 percent in the second year and 35 percent in the third year, in addition to any other applicable tariffs."
One of the groups that petitioned the ITC was the United Steelworkers (USW). "Today’s remedy vote by the ITC is a great victory for the USW, its members and for all U.S. tire workers,” declared USW international president, Leo. W. Gerard. “The tariffs voted by the commissioners should remedy the market disruptive surge in Chinese tire imports that have caused harm to the domestic industry.”
With the wheels in motion, it’s the President’s turn. It’s time for the Administration to step on the gas when it comes to driving its Chinese trade policy towards fair play.
Why does this matter? Start by looking at the human cost.
•Job loss: Eight additional U.S. tiring manufacturing plants employing 8,000 workers are scheduled to be closed this year, according to the Alliance for American Manufacturing, .
•Safety guidelines: U.S. importers have received a number of complaints about Chinese models falling apart, and in August 2006 a van in Pennsylvania lost control when a tire tread and belt separated leaving two passengers dead and two severely injured . In the same year, an ambulance outfitted with Chinese tires rolled over in New Mexico. Fortunately, no one died.
•Missing something?: 45,000 of Chinese imported tires were discovered to be missing a necessary gum strip. Again, Chinese efforts to save money ended up hurting American consumers, in this case fatally.
The broader relevance of the issue is our relationship with China. The cheap import of Chinese tires is unfair and cripples our domestic industry. The ruling by the ITC was unanimous. US workers might be able to compete and win on a level playing field, but this field is tilted.
So why so much fuss over 421? If our tire industry is under pressure, why wouldn’t the Obama administration follow the ITC’s recommendation to check Chinese competitors before the proverbial “air” runs out? This especially, when the “Commission’s economic analysis indicates that the recommended tariff will provide significant beneficial effects to the domestic industry and its workers while having relatively insufficient costs to consumers.”
The dilemma is this: President Obama will face considerable pressure from the power of business lobbies and conservatives to follow in the footsteps of President Bush, whose policy of repeatedly ignoring every recommendation for relief that the trade commission issued left the manufacturing sector in serious need of a shovel and chain. The question now is whether he will stand for workers and manufacturers, or multinational corporations and China. We’ll see in September.