As reported in the linked article, the U.S. International Trade Commission followed up an investigation into a complaint brought by the United Steelworkers’ Union by recommending that the Obama administration impose stiff tariffs on Chinese tire imports.
A majority of the U.S. International Trade Commission recommended on Monday that PresidentBarack Obama impose additional duties for three years on imports of low-cost Chinese tires the panel says are harming U.S. industry.
In a case seen as a test of how the Obama administration will cope with Chinese trade issues, four members of the six-member commission recommended that Obama impose additional duties of 55 percent in the first year, 45 percent in the second year, and 35 percent in the third year on imports of passenger vehicle and light truck tires from China.
… Trade experts are watching to see whether Obama, who criticized China for what he called unfair labor practices during his campaign and won strong labor support in his bid for the White House, will be tougher on China than predecessor George W. Bush.
Bush routinely rejected petitions for restricting Chinese imports.
Obama won a lot of votes (including mine) by campaigning against trade policy that led to an enormous trade deficit and the loss of millions of manufacturing jobs. But since taking office, he has welched on promises to overhaul NAFTA (the North American Free Trade Agreement), has done nothing in response to the imposition of tariffs on American products by Mexico, has turned a blind eye to dumping by the Japanese and sent his Treasury Secretary to Beijing on a humiliating mission to beg the Chinese to keep purchasing American debt. Instead, he has chosen to be a global “team player” by disavowing the kinds of protectionist measures now recommended by his own Trade Commission while jawboning foreign leaders to boost domestic consumption and rely less on exports to the U.S. The trade deficit has declined dramatically, but that’s purely a function of the global recession, much the same as the way international trade declined during the Great Depression. Obama can take no credit. But the pressure to do something meaningful to address the trade deficit is building.
Reaction to the Trade Commission’s recommendation is worth of comment:
Chinese tire producers countered that U.S. companies largely abandoned the low-cost tire market before Chinese manufacturers moved in. They also noted that no U.S. tire producers had joined the steelworkers’ complaint.
The fact that no U.S. tire producer has joined the complaint should come as no surprise. They dare not anger China, or they will be putting their Chinese operations and sales at risk.
Vic DeIorio, executive vice president for sales of Chinese tire maker GITI in the United States, said he was disappointed that four of the six trade commissioners “felt compelled to take a decidedly protectionist path.”
“If there is a barrier placed on tires produced in China, U.S. manufacturers and distributors will simply increase importation of tires from other countries, such as Venezuela. What’s more, duties will result in higher tires prices for American consumers at a time when they can ill afford it,” DeIorio said in a statement.
DiIorio makes a valid point. Tariffs on China alone would likely drive importers to turn to other foreign suppliers. While Venezuela is no trade threat to the U.S., there are plenty of others like Japan, South Korea, Germany, Mexico and others who are, and would happily snap up the whole U.S. tire market if given a chance.
This kind of product-by-product, country-by-country approach to trade issues is a complete waste of time. The Trade Commission could examine every product imaginable imported from almost any overpopulated nation and arrive at the same conclusion it has reached in this tire case. What’s needed is a complete overhaul of U.S. trade policy, applying tariffs across the board to every manufactured product exported by every overpopulated nation, leaving domestic manufacturing as the most sensible, most economic option.
The goal is to restore a balance of trade, not halt it. Sure it’ll drive prices higher for consumers, but consumers are also laborers and the explosion in the demand for labor will drive their incomes even higher, more than offsetting price inflation.
Maintaining the status quo, the huge trade deficit that has bankrupted this nation, isn’t an option and Obama knows it. But, just as he is learning that talking with Iran is a futile exercise, he’ll also learn (hopefully) that no overpopulated nation is going to abandon its reliance on exports to the U.S. just because he has asked them to. Restoring a balance of trade is Obama’s responsibility – not China’s, not Japan’s, not South Korea’s, not Mexico’s and not Germany’s. The sooner he understands that, the sooner we can look forward to real economic recovery.