Burning Rubber: Proposed Duties on Chinese Tires Whiff of Senseless Protectionism

Abstract

Although the stew that is the U.S.-China trade relationship has the potential to reach a full boil, it has been on a low simmer since before the start of the financial crisis and subsequent global economic slowdown. Despite pork bans, poultry bans, a steady stream of antidumping and countervailing duty investigations, dispute settlement judgments from the World Trade Organization, accusations of currency manipulation, admonitions regarding China’s dependence on export-led growth, and China’s concerns about the impact of profligate U.S. government spending on its U.S. debt holdings, the relationship has held up fairly well. But that could all change quickly. By September 17 President Obama is required to render a decision in a potentially combustible case concerning automobile tire imports from China. Pursuant to a petition filed by the United Steelworkers of America under Section 421 of the Trade Act of 1974 — known colloquially as the “China-Specific Safeguard” — the U.S. International Trade Commission has already recommended that Obama impose duties of 55 percent on imports of consumer tires from China. Under the law, the president can adopt, modify, or reject that recommendation. Although this may sound like just another day in Washington, Obama’s decision will be consequential. It will help clarify his administration’s heretofore opaque trade policy objectives. It will set the tone for U.S.-China trade relations for the foreseeable future. And it will affect broader international trade relations, for better or for worse, as America honors or disavows its pledge to the Group of 20 nations to avoid new protectionist measures. Under the statute, the president has discretion to deny import “relief” if he determines that such restrictions would have an adverse impact on the U.S. economy that is clearly greater than its benefits, or if he determines that such relief would cause serious harm to the national security of the United States. The first condition is met overwhelmingly. And, for good measure, there is a very strong argument that the second is met, too. But at the end of the day the president is a politician, who is presumed to owe Big Labor for his election last November. Will the president do what is overwhelmingly in the best interest of the country? Or will he do what he thinks is best for himself politically? This paper provides some law and case background and then summarizes why the president should reject the recommendations of the USITC and deny import restrictions altogether.

Keywords: U.S.-China trade, American rubber imports, United States-China relations, federal trade policy, government regulation of trade, high tariffs, international trade commission

JEL Classification: F10, F13