President Obama, after eight months in office, has made his first trade policy move in support of American workers, imposing stiff tariffs (though lower than the tariffs recommended by the U.S. International Trade Commission) on imports of tires from China.
Subsequent whining by the Chinese about protectionism and violation of World Trade Organization rules was predictable.
“China strongly opposes this serious act of trade protectionism by the U.S.,” a statement posted on Web site said. “This act not only violates the rules of the World Trade Organization but also violates the relevant commitments made by the U.S. government at the G-20 financial summit.”
Obama’s move will harm U.S.-China economic and trade relations, the statement said.
One could only hope.
Obama had until Sept. 17 to accept, reject or modify a U.S. International Trade Commission ruling that a rising tide of Chinese tires into the U.S. hurts American producers. The United Steelworkers blames the increase for the loss of thousands of American jobs.
The federal trade panel recommended a 55 percent tariff in the first year, 45 percent in the second year and 35 percent in the third year. Obama settled on slightly lower penalties — an extra 35 percent in the first year, 30 percent in the second, and 25 percent in the third,said.
… Governments around the world have suggested the United States talks tough against protectionism only when its own industries are not threatened. U.S. rhetoric on free trade also has been questioned because of a “Buy American” provision in the U.S. stimulus package.
What the rest of the world criticizes as “protectionism” is any tariffs imposed by the U.S. on their imports – any violation of the “free trade” spirit of WTO rules. The fact is this: while the WTO talks about “free trade,” it actually enforces protectionist tariffs in favor of two thirds of its member states, including China, but not the U.S. These nations eagerly cry “foul” and deride the U.S. as “protectionist” any time we even consider moves to support our own industries, while they are, in fact, the biggest beneficiaries of WTO-enforced protectionism.
… Roy Littlefield, executive vice president of the Tire Industry Association, which opposes the tariff, said it would not save American jobs but only cause to move production to another country with less strict environmental and safety controls, less active unions and lower costs than the United States.
The Tire Industry Association is an international organization representing all tire manufacturers of the world. Gee, let’s see. 95% of the world’s tire manufacturers are foreign, but the biggest market is the U.S. Is it any wonder that the Tire Industry Association is opposed to U.S. tariffs? And notice how these industry associations all adopt American-sounding names and have American presidents. That way, it sounds like these are American businesses supporting free trade and criticizing American tariffs. There’s no shortage of these American executives who, for the right price, are perfectly willing to take up the cause of foreign interests to the detriment of their own countrymen.
Littlefield makes a valid point, though. What’s to stop the tire imports from shifting to Japan, Korea, Mexico or some other nation where labor is in a gross state of over-supply? We need import tariffs on tires from all such countries, not just China. But we need even more. Domestic auto manufacturers are being put at a competitive disadvantage without access to cheap Chinese tires. What we need are tariffs on all manufactured products imported from all overpopulated nations. It’s the only way to eliminate the global trade imbalances that have wrecked our economy, trade imbalances driven by huge disparities in population density.
For the Chinese government, the tire dispute threatens an economic relationship crucial to China’s economic growth. There was speculation before the decision that new tariffs could produce public pressure on Beijing to retaliate, potentially sparking a trade war.
Let’s see, what’s the worst that could happen in a trade war with China? A total cessation of trade. The net result is that $250 billion worth of manufacturing returns to the U.S., boosting GDP by $500 billion. Sounds like an outcome we could live with! Bring it on! So what if China threatens to dump its U.S. Treasury holdings? Such a boost to the U.S. economy would send the dollar soaring, making other nations eager to buy up every bond the Chinese sold!
There’s a lot more work to be done on our badly-broken trade policy. Let’s hope this is a start of that process and not just a token gesture. Let’s hope it’s a sign of impatience within the administration with the lack of progress by nations who have promised to rely less on exports and to expand their domestic economies. Maybe they just need a little help in keeping that promise.