Chinese tire trade dilemma

President Obama is under pressure from the Union representing workers at American tire companies, to level tariffs on cheap Chinese tires allegedly crowding US made tires out of the market. His decision may force him to choose between pleasing big labor, which largely supported his campaign, and big business, which largely did not. And he'll have to decide this month, before hosting the leaders of China and 18 other nations, at a summit on the global economic crisis.

The United Steel Workers Union, which represents US tire workers, won an International Trade Commission (ITC) ruling that calls for 3 years of tariffson Chinese made tires, starting at 55% and falling by 10% each of the next two years. Union President Leo Gerard says "we've lost 7000... jobs across the country since China has surged into our market and undercut our prices." The ITC ruled US workers were due relief, under a provision of the World Trade Organization rules that tracks "surges" in imports. The surge occurred between 2005 and 2008; Chinese tire imports actually declined this year due to the recession and the slump in car sales.

The tariffs are not supported by the tire companies or the association of tire dealers. The tires are actually made for Goodyear, Michelin, Cooper and Bridgestone using the cheaper labor and materials in China. Those companies tend to focus their domestic plants on higher quality and higher performance tires, but the low end tires account for about 15% of the market. Tariffs would raise their prices and presumably reduce the amount of sales. Dennis Wilder, of Brookings Institution, says "more jobs would be lost in the retail end of tire industry if this decision is made, than would be gained in the manufacturing end of the tire industry."

At least two tire companies along with the Big 3 automakers, farmers and food manufacturers have asked the tariffs not be imposed. They're concerned about possible Chinese retaliation. The President must decide whether to accept the ITC recommendation by September 17th, a week before the G-20 summit in Pittsburgh, where leaders of the world's 20 richest nations will likely reaffirm their pledge not to use protectionist measures to deal with the global recession. Wilder says imposing the tariffs "would undermine American credibility in trying to revive the global economy."

Gerard, however, says imposing tariffs would not be protectionist it would merely be enforcing the rules. And he says the US "can't sustain on an ongoing basis an annual trade deficit with China of 325, 350 billion dollars growing bigger every year."