U.S. to Impose Tariff on Tires From China
Saturday, September 12, 2009
In one of his first major decisions on trade policy, President Obama opted Friday to impose a tariff on tires from China, a move that fulfills his campaign promise to "crack down" on imports that unfairly undermine American workers but risks angering the nation's second-largest trading partner.
The decision is intended to bolster the ailing U.S. tire industry, in which more than 5,000 jobs have been lost over the past five years as the volume of Chinese tires in the market has tripled.
It comes at a sensitive time, however. Leaders from the world's largest economies are preparing to gather in Pittsburgh in less than two weeks to discuss more cooperation amid tensions over trade.
The tire tariff will amount to 35 percent the first year, 30 percent the second and 25 percent the third.
Although a federal trade panel had recommended higher levies -- of 55, 45 and 35 percent, respectively -- the decision is considered a victory for the United Steelworkers union, which filed the trade complaint.
"The president sent the message that we expect others to live by the rules, just as we do," Leo W. Gerard, president of the union, said Friday night.
China's government and its tire manufacturers, as well as tire importers and some U.S. tire makers with plants overseas, had strenuously objected to the measure.
"The President decided to remedy the clear disruption to the U.S. tire industry based on the facts and the law in this case," the White House said in a statement released Friday night.
Obama's decision signals a marked shift from the policy of the Bush administration, which had rejected taking action in four similar cases it reviewed.
The union complaint was filed under a law Congress passed in 2000 that allows the United States to impose tariffs and other trade protections if a surge in Chinese imports damages a U.S. industry.
China agreed to the provision while negotiating to join the World Trade Organization, but until Friday the general "safeguard" provisions of the law had never been invoked.
Critics warned that if the general "safeguard," which expires in four years, was never used to protect American workers from Chinese imports, then political support for free trade would be eroded.
"Since China joined the WTO, American workers have not been assured that the government would defend them against unfair trade," Sen. Sherrod Brown (D-Ohio) said.
The tariff, which will take effect Sept. 26, represents the first such case under the law for Obama, and his decision has been highly anticipated.
During the campaign, he had pledged to "crack down on China" and "work to ensure that China is no longer given a free pass to undermine U.S. workers," as his Web site put it.
But his commitment to that point of view was thrown into doubt during the primaries when a Canadian official said an Obama adviser had privately characterized his tough stance on the North American Free Trade Agreement as political posturing.
Marguerite Trossevin, who represents a coalition of U.S. tire companies that import Chinese tires, said the tariff decision is "very disappointing." She predicted price increases for U.S. consumers and losses for U.S. tire importers.
"For the U.S. tire distributors and consumers, there's going to be a heavy burden to bear," she said. "It sends the message that special interests will get protection if they ask for it -- regardless of what that means for broader trade policy."
China's Ministry of Commerce said in a statement early Saturday that the move violated WTO rules. "China strongly opposes this serious act of trade protectionism by the U.S," the ministry said, according to the Associated Press.
Not surprisingly, there were conflicting predictions about what effect the tariff might have on the U.S. industry.
Supporters said the measure would have only a negligible effect on the price of tires and would lead U.S. manufacturers to invest in their U.S. plants.
The tariff's detractors said higher tire prices could lead some consumers to wait longer before replacing tires, creating a safety risk. Moreover, they said, the tariff won't result in more jobs. Tires will simply come in from other low-cost countries, they say, and U.S. manufacturers, keep making their cheaper tires in China.
"U.S. tire manufacturers years ago decided to move production of low end tires off-shore," said David Spooner, a lawyer representing the Chinese tire industry. "Frankly, a temporary tariff is not going to get them to change their business plan."