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Published on June 22, 2009

Letter: Tire quotas would hurt, not help, economy

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Opinion

TROY, Mich. (June 22, 2009)—The United Steelworkers (USW) are attempting to limit the number of Chinese-made tires imported into the U.S., but that effort won't save American jobs.


As a resident of Michigan, which has been particularly hard hit by the recession, and someone deeply involved in the tire industry, I'd be in favor of anything that would help our economy. This won't.


In April, the USW petitioned the U.S. International Trade Commission (ITC) to declare that the U.S. tire industry has been harmed by an increase in tire imports from China. The union wants the commission to impose a quota on Chinese tires, cutting imports back to their 2005 level under the mistaken belief that this will save jobs.


But a quota in turn only would lead tire distributors and retailers to buy their “Tier 3” or “low cost” tires from other countries. That won't save U.S. jobs. It would also possibly cause a tire shortage, likely leading to higher tire prices and additional financial burdens on thousands of independent tire businesses.


I'll leave it to U.S. trade officials to decide whether a quota on tires is worth igniting a possible trade war with one of our largest trade partners. But speaking as a leader of a Michigan-based family-run tire business, I know for certain that a quota on tires is not good for the typical consumer who watches his or her spending and pinches pennies any way possible in this difficult economy.


The fact is that when people have to—or should—replace their tires, Michigan consumers typically look for the economy or value tires. A quota would push the cost of these tires higher, forcing some to wait too long to replace worn out tires, potentially endangering themselves and others on the road.


Founded in 1970, my family's company sells tires to thousands of independent businesses. I speak to hundreds of independent tire dealers every month, and I have “grassroots” experience in where the tire market is moving and where it has been.


While our business sells many different brands of tires at many price levels, I have a stake in both sides of this argument. Indeed, our largest supplier is an American company, and our second largest is Chinese.


I can tell you firsthand that consumers and tire businesses will not switch their Tier 3 or low-cost tire purchases to U.S.-based manufacturers if a quota on Chinese tires is imposed. The quota will raise tire prices for consumers. Tire importers—under pressure from cost-sensitive consumers—will then turn to the next best price option: tires made in South Korea, Mexico, Indonesia and other countries that produce them at lower cost.


American manufacturers elected to exit this Tier 3 market years ago.


Therefore, a quota is unlikely to save U.S. jobs. The big winners will be tire manufacturers in those other countries.


The losers will be American independent tire dealers, distributors and consumers.


The simple fact is that many manufacturers choose not to manufacture low-cost tires, preferring to focus on higher-profit tires.


You can't expect cost-conscious consumers to replace their lower- priced Chinese-made tires with higher-priced American-made tires.


That's like saying import restrictions on the Kia Sorento would lead Americans to buy Cadillac Escalades.


With unemployment hovering at 12.7 percent in our state, people in Michigan are in the throes of very hard times, more so than the nation at large. I am concerned that a quota would impose even more pain.


If the ITC finds in favor of the USW, it will offer a recommendation to the Obama administration on a potential remedy. A quota, for example. The administration does not have to accept the ITC's recommendation. It can decide to ignore the commission if it believes the potential remedy would cause more economic harm than good. In my opinion, not imposing a quota would be better for the U.S. economy, and the tire industry.


The bottom line for everyday Americans is this: Quotas or tariffs on tires from China will only hurt jobs in my business and many of my customers' businesses; guide tire importers to bring in more tires from other countries; and take away choices for the most cost-conscious customers.


Ross Kogel Jr. is president of Tire Wholesalers Co. Inc, a family-owned wholesale tire distribution business based in Troy, Mich., that has four locations in that state.

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