Obama Raises Tariff on Chinese Automotive Tires

The United Steelworkers union is praising president Obama’s imposition of additional import duties on Chinese-made automotive tires this past Friday. According to White House press secretary Robert Gibbs, the president “decided to remedy the clear disruption of the U.S. tire industry based on the facts and the law in this case.”

Beijing was quick to issue a response in which the Chinese government said it “strongly condemns this grave act of trade protectionism by the U.S.” Yao Jian, as spokesman for China’s Ministry of Commerce said in a statement posted on the ministry’s website that, “This step not only violates the rules of the World Trade Organization, it is also contrary to the relevant commitments that the United States government made at the G20 financial summit.”

President Obama’s action was prompted by a petition for protection filed earlier this year by the steelworkers union whose members work at a number of tire production plants across the U.S.

In its petition, the union claimed that importation of Chinese-made tires had tripled over the last four years, from about 15 million to approximately 46 million in 2008. The dramatic increase in imports, they claimed had resulted in the loss of over 5,000 jobs for domestic tire factory workers.

Chinese-made tires account for only about 17% of the U.S. automotive tire market and imports have actually down in 2009.

The White House said that the increase on duties on imported Chinese-manufactured light truck and passenger car tires, from the current 4% to 35% will remain in effect for one year. The amount will drop in 2011 to 30%, and again in 2012 to 25%.

The new import duty will go into effect on September 26.

The current import duty on Chinese-made tires is 4%, and the increase approved by the administration is lower than what the U.S. International Trade Commission had recommended. It is, however, considered high enough to significantly reduce the numbers of tires being imported from China if not eliminate them altogether.

In August, Chinese tire manufactures claimed that even a single digit increase in tariffs would reduce their profit margins to the point that exporting to the U.S. would no longer be feasible.

The ITC had suggested raising tariffs to 55% in year one with 10% decreases in each of the subsequent two years.

United Steelworkers Union president Leo Gerard said, “For far too long, workers across this country have been victimized by bad trade policies and government inaction. Today, President Obama made clear that he will enforce America’s trade laws and stand with American workers.”

Gerard’s union had initially requested that the government impose a limit of 21 million Chinese-made tires, with that number increasing by 5% annually thereafter.

The final petition, which was filed under “Section 421” of the United States trade law, called on the federal government to limit the importation of Chinese tires on the grounds that current levels are “market-disrupting”. The provision in U.S. trade law was agreed to by the Chinese government when it was granted membership in the WTO in 2001. However, the “safeguard” measure had not been invoked against Beijing until last Friday’s decision by the Obama administration.

Four similar petitions were rejected by former president George W. Bush, and the ITC had also killed two other requests before they reached his desk.

Some Congressional members also cheered the president’s actions. Senator Sherrod Brown (D-OH) said, “Today, the President courageously stood up and enforced fair trade rules that will save jobs and help our communities.”

An increased duty on automotive tires represents the latest move by the current administration to impose protective restrictions on Chinese imports.

China has typically issued statements denouncing such moves by Washington and has increasingly lobbied the WTO for redress.

Some analysts predict that other domestic labor organizations and manufacturing concerns may now seek relief under U.S. trade law, which does not require petitioners to prove a nexus between unfair trade practices and an increase in imports.

Domestic tire manufacturers do not supported the increased tariffs, and Cooper Tire of Findlay, Ohio publicly opposed the move.

They warn that the increased duty will result in job cuts and a shortage of low-priced tires which the industry has ceded to Chinese tire makers.

Marguerite Trossevin, counsel to the American Coalition for Free Trade in Tires said, “We are certainly disheartened that the president bowed to the union and disregarded the interests of thousands of other American workers and consumers.”

Posted in In the News

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