I guess this counts for more than just chicken feed in the arena of global trade contestation. I have been a bit tardy--not by much, mind you--on the latest protectionist squabble between the US and China. Once more, I believe the accretion of these sorts of trade squabbles have the potential to result in a bona fide trade war--not necessarily a bad thing if it means weaning the US off limitless Chinese capital it has clearly not put to good use. Now, American steelmakers have taken increased interest in laying into the PRC over the cost of steel products used in tire production.Given the backing of organized labor for Obama, I for one believe that it has gotten a pretty raw deal from him so far such as with the automakers bailouts. It's so very Clinton-esque. Now, the United Steel Workers (USW) are going for the jugular by requesting that the US International Trade Commission (USITC) allow Section 421 investigations under the Trade Act of 1974 to proceed. Previous attempts to gain traction on this issue with the Bush administration failed, but the USW is betting that the political climate (i.e., a Democratic executive) is more favorable now. Let us first look at a description of Section 421 from the USITC site:
Under section 421 of the Trade Act of 1974, the Commission determines whether imports of a product from China are being imported into the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products. If the Commission makes an affirmative determination, it proposes a remedy. The Commission sends its report to the President and the U.S. Trade Representative. The President makes the final remedy decision.Yes, it is a petition for import relief provided claims that domestic manufacturers' existence is being threatened by export dumping. The USW site has more details on the petition itself:
Petitioner & Subject Country: The United Steelworkers (USW) Section 421 trade case petition filed Apr. 20, 2009 with the U.S. International Trade Commission (ITC) shows how imports of consumer tires have surged in recent years, based on census data. The subject country for the investigation is China.
Product Description: Tires for consumer motor vehicles, including passenger cars,
station wagons, vans, sport utility vehicles, minivans and light trucks.
U.S. Tire Industry & USW: The USW represents about 15,000 tire workers at 13 plants
in nine states, which accounts for nearly half of the industry’s production capacity in 2008. The domestic consumer tire industry consists of ten producers with 27 plants located in 15 states. The tire producing states include: Alabama, Arkansas, Georgia, Illinois, Indiana, Kansas, Mississippi, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee and Virginia.
Volume of Trade: In 2008, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S. The petition filing says, “Compared to 2004, by the end of 2008, imports from China had increased a staggering 215 percent by volume and 295 percent by value.”
Evidence of Market Disruption: During 2004-08, industry data shows a significant idling of capacity, with tire plant closings and layoffs in several states. Between 2004 and 2008, domestic production of consumer tires declined by over 25 percent. The domestic industry’s share of the U.S. tire market declined from 63 percent in 2004 to below 50 percent in 2008. Chinese producers’ share of the consumer tire market in the U.S. increased from less than five percent to more than 17 percent.
Domestic Job Losses: The U.S. consumer tire industry has lost 4,400 jobs during 2004-08. There have been announcements of two additional permanent plant shutdowns of consumer tire units in 2009 with total job losses of 2,400.
Relief Requested: The USW seeks an annual import quota of 21 million consumer passenger tires for a three-year period, which would return China imports to a 2005 level.
USW Multi-Industry Profile: The USW is the largest industrial labor union in North American, representing 1.2 million current and retired workers in industries that include primary and fabricated metals, mining, chemicals, paper, glass, rubber, transportation, utilities, container industries, pharmaceuticals, call centers, and health care.
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I honestly doubt whether Chinese tire imports are mainly behind these industry dislocations which I believe are more attributable to a slowdown in overall demand for vehicles. That is, Chinese tires are not OEM for any major brands, be they American, European, or Asian unlike several US counterparts. The WSJ opinion pages are unsurprisingly unhappy about this petition, with it being portrayed as a test of Obama's union ties. Still, this may be a litmus test for Obama's commitment to organized labor as various "progressive" voices are already expressing disappointment in his Bushian makeover.
In any event, the USW is certainly busy on the China-bashing front as it has already filed another separate petition on tubular and pipe steel. Whatever happened to ol' China Currency Coalition Obama? Once more, his friends are counting on him. If he keeps acting Bushian, I fear for his political longevity.
