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Published on July 6, 2009

Tough decision on Chinese tires

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Opinion

AKRON (July 6, 2009)—President Barack Obama faces a difficult task in deciding what, if any, action to take now that the U.S. International Trade Commission (ITC) has recommended imposing duties on Chinese passenger and light truck tire imports for the coming three years.


While the ITC surprised everyone with its recommendation of duties rather than quotas, the 4-2 affirmative vote was not a ringing endorsement of the action.


In fact, two of the ITC commissioners indicated they would recommend to the president that no trade restrictions be levied against Chinese tire imports because they believe that would do nothing to help the U.S. tire industry or its workers.


That last point seems to be the crux of the entire matter.


No one disputes the United Steelworkers' (USW) claim that the U.S. tire industry has lost more than 5,100 jobs and 10.3 percent capacity utilization between 2004 and 2008. What is unclear is whether imposing duties or limiting passenger and light truck tire imports through quotas would do anything to reverse the downsizing taking place in tire manufacturing capacity.


ITC Commissioner Deanna Turner Okun and Vice Chairman Daniel Pearson don't think duties are the answer. Speaking for herself and Mr. Pear¬son, Ms. Okun said the trend toward grad¬ual downsizing in the U.S. tire industry likely would continue regardless of the commission's recommended action.


To the contrary, she said, “Implementing a trade restriction would be far more likely to cause market disruption than to alleviate it.”


Interestingly, the Rubber Manufacturers Association, which represents tire manufacturers in North America, has been silent on the subject.


Complicating the issue, President Obama also must consider that the tire industry comprises more than just manufacturing. It includes all those who sell and distribute tires—who, in pure employment numbers, far outpace that of the manufacturing segment.


Many of these parties would be hurt by any action that reduces the number of lower-priced Chinese-made tires entering the U.S. market.


In addition, the president must look at how restricting Chinese imports would affect U.S. companies with plants in China, most notably Goodyear and Cooper Tire & Rubber Co. Together, they have three plants there, although it's unclear how many consumer tires made at those plants are destined for export to the U.S.


Finally, Mr. Obama likely will want to avoid starting a trade dispute with China, which holds hundreds of billions of dollars of U.S. debt.


And clearly, if the flood of Chinese tires into the U.S. is dampened, imports from other low-cost producers in countries such as India, Brazil and even Vietnam will increase. Then what? More duties or quotas? Where will it end?

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