Saturday, June 20, 2009

ITC rules on China tire imports - finds import surge (dumping) in US

by M. Ulric Killion 

In Beijing, according to a government spokesman, "China "deeply regrets" about the affirmative determination made by the US International Trade Commission (ITC) on China safeguard investigation involving certain passenger vehicles and light truck tires" (Xinhua, 2009). The ITC "found certain passenger vehicles and light truck tires from China are being imported to the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or competitive products."

According to Yao Jian, the spokesman for the Ministry of Commerce (MOC), "The ITC's decision is "not objective", and is "against the World Trade Organization (WTO) regulations. Lots of evidence have proved that the Chinese-made tires did not cause direct competition with the US products. Restriction of the Chinese imports can not fix the structural problem in the US, he said. We have noted the US tire makers did not claim such disruptions. The US Tire Industry Association, which representing all segments of the tire industry, also opposed to limit Chinese tire imports, said Yao. We hope the US authority could consider the overall interests of the two sides and think twice before the final rule, he said. As a result of the affirmative determination, ITC will consider the issue of remedy, and send its report to the US President and the US Trade Representative by July 9" (Xinhua, 2009).

Many in China perceive the ITC decision as evidence of growing domestic protectionist policies, especially in the United States. In Washington, on June 2, 2009, the ITC hearing commences. It is a case filed by the United Steelworkers (USW) Union, which alleges that an increase in Chinese tire imports has cost 7,000 US jobs. In response, the USW wants the Obama Administration to more than halve the number of imports from 46 million units last year to 21 million. The USW also wants the Obama administration to employ section 421 of the Trade Law, which requires the ultimate approval or rejection of the president even after a ruling of the US International Trade Commission (Zhu, 2009).

Dealers are negotiating beside a tire model at an auto part exhibition in Shanghai, May 21, 2008. [Asianewsphoto].

A problem is that the administration of President Obama has sent mixed signals on the critical issue of Sino-US trade. For instance, there is Secretary of State Hillary Clinton encouraging China to continue to buy US debt, while US Treasury secretary Timothy Geithner accused China of currency manipulation, though the US immediately and officially withdraws his comment, and the appointment of Ron Kirk as the new US trade representative, who announced that he did not come to the job with deal fever. More particularly, while Kirk supported international trade in a broad sense, "he has also made comments suggesting that protectionism might not be so bad after all" (Abrams, 2009). The problems of US protectionist policy may become more of a reality with the passage of time for proponents of Buy American provisions.

These problems directly associate with the U.S. bailout and its potentiality for protectionist consequences. As Daniella Markheim (2009) earlier observed, "Looming large in the stimulus package passed by the U.S. House of Representatives Wednesday--and currently under consideration in the U.S. Senate--is the expansion of 'Buy American' provisions that discriminate against foreign goods and services in U.S. government procurement." 

While the House legislation only focused on iron and steel products made in America being in public works projects that are funded by the stimulus package, notwithstanding domestic steel adding an amount great than 25 percent to project costs, the Senate, contra distinguishably, intends even more harsh restrictions, such as the banning of any imports in subsequent stimulus-funded projects. Protectionism, as Markheim rightly observed, is not the answer to American woes.

Nonetheless, there are many groups in the US pushing the Obama administration to use the economic crisis as an excuse to resort to trade protectionism (Zhu, 2009).

The USW (2009) announced that they are pleased that ITC has moved forward on the union's Section 421 petition, ruling by a 4-2 vote that a surge of low-priced consumer tires from China is harming the domestic industry," an import surge they alleged has caused "major job losses and plant closures in the United States."

According to the USW (2009): "Our domestic industries cannot survive unless our government enforces the trade laws designed to curb and dissuade anti-competitive practices that cause market disruptions," said USW International President Leo W. Gerard. "We anticipate the remedies that will be delivered to President Obama will allow the time necessary to rebuild the U.S. tire industry."

On April 20, 2009, The USW filed its petition with the ITC. The petition sought relief under Section 421 of the Trade Act of 1974. More particularly, Section 421 is a temporary country-specific safeguard that China agreed to as part of its bilateral trade negotiations with the United States leading to its 2001 WTO membership.

"The USW petition claimed that imports of consumer tires from China increased from 2004 to 2008 by 215 percent in volume and 295 percent by value. In 2008, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S., making it the largest source of consumer tire imports. While imports nearly tripled by volume during the surge period, domestic production of consumer tires declined by more than 25 percent. During this period, nearly 5,100 U.S. tire workers have lost their jobs as a result of massive erosion in the domestic production that coincided with the massive increases in imports of consumer tires from China. About 3,000 more jobs are slated to be lost by year's end as three plants are threatened to close. Whether the remedies will be established at a sufficient level to save these jobs and plants is a question that the USW and others await the answer. To combat this egregious trend, the USW believes that the government should impose an import quota on China of 21 million consumer tires used on passenger cars, light trucks, minivans and sport utility vehicles per year. This would return Chinese tire imports to a 2005 level and allow for an increase of five percent per year over a three-year period. 'We anticipate that the final decisions on remedies will improve domestic job security, increase production and sales, and allow for investment in capital equipment to better compete in the global market for the long term,' said Tom Conway, USW International Vice President" (USW, 2009).

China regrets US rule on tire imports, Xinhua, June 20, 2009.
Alec Zhu, Sino-US trade ties face a tough tire test, China Daily, June 9, 2009.
Jim Abrams, Former Dallas Mayor Ron Kirk confirmed as US trade representative, AP, March 18, 2009, (Chicago Tribune).
Markheim, Daniella. 2009. Buy American Hurts America, Heritage Foundation, WebMemo #2256.
USW Lauds ITC Vote Affirming China Tire Import Surge, United Steelworkers (USW), June 19, 2009. 

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2010.

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