Where the Rubber Meets Domestic Politics — At the Expense of U.S. Companies & Consumers

The news is saturated with President Obama's announcement that he is raising import duties by 35% on Chinese made tires. NPR broadcast this morning "that the Chinese claim the tariff increase will effect 100,000 workers and 2 billion dollars of exports". According to the report "the U.S. Steel Workers in a petition to Obama claim that Chinese tire exports surged 215% between 2004 and 2008 while the U.S. tire industry shed 400,000 jobs".

Roy Littlefield, President of the Maryland based Tire Industry Association "which has fought the tariffs" is quoted saying "they'd be of little help because if tire companies can't source low cost products from China, they'll just get more from Brazil or India instead ... We're sympathetic to concerns of the union but in this particular issue it wouldn't bring back any union jobs unfortunately". NPR goes on to report that "supporters of the tariff increase claim that China gives exporters an unfair advantage through subsidies and an artificially low currency so the U.S. must level the playing field for its companies". Ironically, "The tariffs won't just hit Chinese producers. Both of the U.S.'s remaining domestic manufacturers -- Goodyear Tire & Rubber Co. and Cooper Tire & Rubber Co. -- make tires in China that they sell in the U.S. [and] Cooper this year is on track to import 2.5 million tires that it made in China. It was planning to boost that to four million next year" according to "Tariff on Tires to Cost Consumers" in today's WSJ.

So what’s going on here? Practically nothing to do with tires and everything to do with domestic politics in both the U.S. and China. Russell Moses, Dean of The Bejing Center for Chinese Studies stated on NPR that “the Chinese government is concerned with unemployment here [and] production here and less concerned with international consequences of the way in which they've structured industry and trading". In "Move Pleases Labor, Complicates Policy", another WSJ column this morning, Peter Fritsch reports that Obama's "decision to side with the United Steelworkers and impose temporary tariffs on Chinese car tires implies a potentially costly trade-off for the administration, trade and political experts said. In the near term, the move should consolidate the support of blue-collar workers and union leaders for Mr. Obama's ambitious legislative agenda at a critical moment."

The cost: a potential wave of fresh U.S. industry complaints against Chinese imports that could force more uncomfortable choices on an administration walking a fine line between support for American workers and free trade. In addition, it is expected that U.S. consumers who buy low-end Chinese tires will have to pay more as producers try to fill the void in that part of the market. NPR adds that Obama "needs the backing of the Steel Worker's Union for his health care reforms ... and that he [also] needs Congressional support for pending free trade agreements with South Korea and Columbia."

This is just one more example of how two of the world's largest trading partners' leaders thinly obfuscate essential cooperation for global economic recovery in favor of pandering to domestic minority interests over the long-term economic health of their nations.

William Busch

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