Cut China tire imports? Tough call
AKRON (May 11, 2009)—The United Steelworkers' (USW) trade petition with the U.S. International Trade Commission seeking to limit imports of consumer tires from China is a “Catch 22” situation for independent tire dealers and other purveyors of tires.
On the one hand, it seems clear the swell of consumer tires coming from China has contributed to the closing of four U.S. tire plants and the reduction of more than 4,400 jobs in the past five years. Another 2,400 workers will be let go later this year when two more announced plant closings take place.
Over the past five years, the number of consumer tires imported from China has more than tripled. Including tires made in Chinese plants owned by companies outside of China—known as captive imports—as well as those of Chinese-owned man¬u¬facturers, the numbers have grown to 46 million units in 2008 from 14 million in 2004.
This has come as domestic manufacturers have moved capacity for their lower-cost tires offshore to be more competitive and to reduce costs.
Yet for tire dealers and distributors who sell these tires and have built successful businesses in part through them, the idea that their supply of Chinese-made product could be cut in half has to be disconcerting, at the very least.
In its petition, the USW is asking for a three-year import quota, starting with 21 million passenger, light truck, mini-van and SUV tires annually from China, a return to the 2005 level. The quota would rise 5 percent each year to 22 million tires in year two and 23 million in the third year.
The union said this limitation “would improve domestic job security, enable U.S. tire makers to regain lost market share, increase production and sales and allow investment in capital equipment to better compete in the long term.”
Maybe, assuming tire makers want to keep this production in the U.S. That may not be the case.
For people who believe in free and fair trade practices, the growth in imports that has taken place is part of the ongoing evolution that happens in a global economic market system. To limit imports through a quota would undermine this position and create a protectionist policy that could hurt business and stymie innovation in the long run.
Yet if you're an employee of a tire plant about to lose your job as a result of increased foreign competition, you can't be happy with that scenario.
Ultimately, tire dealers must weigh the arguments and decide which is more important to them:
Is it to foster a more protectionist environment, where imports are limited as a means of supporting domestic manufacturing?
Or do they favor free, open and fair trade that encourages competition and ultimately provides consumers with lower cost, better quality products?
We think most dealers will opt for the latter.
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