NEW BRUNSWICK, N.J. (Aug. 6, 2009) — Imposing tariffs or other restrictions on imports of consumer tires from China will jeopardize at least a dozen and as many as 25 jobs in the tire distribution segment for every job saved in the manufacturing sector, according to an analysis of the situation by a Rutgers University economics professor.
In addition, the analysis estimates import restrictions would result in higher prices and other inefficiencies that would cost U.S. consumers $600 million to $700 million a year in added outlays.
The analysis, written by Professor Thomas Prusa and commissioned by the American Coalition for Free Trade in Tires, was made public ahead of an Aug. 7 meeting at the offices of the U.S. Trade Representative in Washington.
At that meeting affected parties will argue their postions on the U.S. International Trade Commission's recommendation to impose duties on imports of Chinese-made passenger and light truck tires for three years. Those duties would start at 55 percent of value, then drop to 45 and 35 percent in subsequent years.
The ITC ruled on the matter in response to a petition by the United Steelworkers, which is seeking the restrictions under provisions of the Trade Act of 1974 in order to protect jobs at U.S. tire factories.
The Obama administration has until Sept. 17 to make a ruling on the issue.
According to Mr. Prusa's worst- to best-case scenarios, the proposed remedies would protect between 423 tire jobs and about 1,800 tire jobs at a cost to American consumers every year of $332,000 to $1.65 million per tire job protected.
According to the Tire Industry Association (TIA), there are about 15,000-20,000 firms in the downstream sector, meaning on average these companies would lose one to two jobs each.
Looking at the imports themselves, Mr. Prusa forecasts a 10-percent or so reduction in tire imports overall short-term — based on a 50- to 75-percent cut in imports from China — but longer term a greater fraction of the imports in question will be diverted to other countries.
Domestic tire producers will not gain much from this action, Mr. Prusa stated, realizing between $100 million and $400 million in windfall gains from higher prices and volume — mostly from mainstream U.S. consumers.
In his preface, Mr. Prusa pointed out the ITC did not evaluate the overall impact of the proposed remedy on the U.S. economy, focusing instead only on recent developments in the domestic tire industry.
The American Coalition for Free Trade in Tires is a group of U.S. dealers and distributors, including those selling private-label brands often manufactured outside the U.S.