Monday, August 31, 2009

China Rubber Industry Association is Against 55 Percent U.S. Taxes on Chinese Tires - An "Op Ed" on Section 421

We received the following "Op-Ed" from the China Rubber Industry Association.  As it discusses a new trade law, we thought it would be of interest to our colleagues teaching international business and trade law courses.  


President Obama’s First Choice On China

Will President Obama maintain his liberal posture on relations with China, fostering increasing cooperation and guaranteeing American-made products and services further access to China’s soon-to-be largest consumer market in the world, or will narrow, shortsighted and protectionist special interests redefine the Administration’s “China policy” moving forward?  Soon, we’ll know.

President Obama must choose between a narrow special interest (the United Steel Workers Union) and continued strong US-Sino relations, at a time when both countries have pledged their collaboration in response to the global economic crisis. The union, under Section 421, a law that has never before been invoked, has asked the Administration to impose extreme tariffs of at least 55-percent on imported Chinese tires. President Obama must personally make the final decision on this matter by late September.

Not a single US tire manufacturer has joined the union in their Section 421 efforts. In fact, the union makes no claim of unfair or illegal behavior by China’s tire makers, at least not in legal filings before the International Trade Commission. The USW simply demands the White House restrict trade because they believe “organized labor” now has an ally in the Oval Office who will support them regardless of the legitimacy of this particular claim or its potential outcomes.  We [the China Rubber Industry Association] hope the USW is wrong.

This attempt seems aimed at forcing the White House to redefine its China strategy into a policy of confrontation instead of cooperation. Rejection of the 421 petition will send a strong signal that President Obama is committed to the balanced and cooperative approach necessary to keep the US and world economies growing—something that is front-of-mind for all American workers, consumers and job-creators.

We [the China Rubber Industry Association] urge President Obama to make a principled choice to reject this restrictive effort to subvert trade law and make China a scapegoat. China had no part in the process that led US tire manufacturers to decide over a decade ago to stop manufacturing entry-level tires in the US. These same companies have made clear that they still have no plans to manufacture entry-level tires in the US. Their decision to abandon entry-level manufacturing allowed others from around the world to fill this void.

Most importantly, it is well-known that China’s entry-level tire imports simply don’t compete with US-produced premium tires. Sales of US-produced premium tires is affected by the woes of American automakers and recent high gas prices, not imports of entry-level tires from China, Mexico, South Korea or anywhere else.

The “USW tariff” will amount to a protectionist “zero quota” and would drive up all tire prices. Morgan Stanley recently stated that, “a tire consumer may not be able to accept further price increases.” This is the first protectionist action aimed at a product that is widely used by individual consumers. President Obama’s rejection of this bid will protect American families. A price increase on entry-level tires will hit low-income families hardest. These families might even defer replacing worn tires – not a good thing for highway safety.

According to the International Trade Commission’s report to the President, the “USW tariff” will likely not have the intended effect of adding a single USW job; however, independent studies suggest that 25,000 other American workers will be victimized by losing their jobs as a direct result of this politically-motivated and ill-conceived attempt to manipulate US-China relations.

President Obama affirmed at the G-20 summit that the last thing the world needs is a rise in protectionism. Now is the time for the President to make a clear statement that the world can depend on strong bilateral trading relations between the world’s two most important economies and on deepening cooperation between the two countries on a wide range of global issues.

If the President invokes the 421 law, a flood of additional protectionist petitions is sure to follow from other special interest groups. This will only serve to further complicate and degrade US-China relations, threatening cooperation and putting the world’s economic recovery at risk. Instead of this dark and uncertain future, we urge President Obama to reject the USW’s 421 petition. By doing so, the President will affirm the need for strong relations between our two countries and ensure a strong global recovery from the recent financial crisis that will be the by-product of US-China cooperation.

We in China look to President Obama for his international leadership. His pending Section 421 decision will indicate the type of leader he wants to be.

 China Rubber Industry Association 

 Kinglong International B 5 Floor, Fu Lin Road 9, Chao Yang District, Beijing 100107 China

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