Give and Take: The Rubber Meets the Road

Give and Take: The Rubber Meets the Road

The rhetoric was flying in Beijing on Saturday morning – over tires and trade. The Commerce Ministry certainly played to the media in citing President Obama's decision to impose hefty new tariffs on car and light truck tires from China as "grave act of trade protectionism", a violation of international trade rules and a breaking of an already-withered commitment by the Group of Twenty (G20) group of economies to refrain from new protectionist measures.

I won't get into the details and numbers of this particular case, since they have been well reported elsewhere. But, in my opinion, the facts are clear:

As part of its agreement to join the World Trade Organization (WTO) in 2001, Beijing agreed to a "special safeguard mechanism" that would allow Washington and other WTO members, based on evidence, to take this type of action to mitigate surges of Chinese goods that were causing "market disruption". Beijing agreed to let the U.S. do this. And it can do it, when the data justifies it, until 2013, when the provision expires under the WTO agreement.

On three separate occasions, President George W. Bush declined to use this authority, known as "Section 421" or the China special safeguard, to assist U.S. manufacturers in other industries that claimed they were being swamped by imports from China. In the tire case (and the three earlier cases), the U.S. International Trade Commission, an independent federal agency that does this type of economic analysis, had agreed with the U.S. claimaints, based on U.S. government data, and recommended that tariffs be imposed.

On the G20, President Obama's decision on tires falls under the umbrella of "trade remedy measures", which are an extremely popular area of international trade law — and not only in the U.S. — and which were not covered by the G20 commitment made in April.   

Before Friday's announcement, several analysts were hopeful that a decision by President Obama to impose the tariffs would, in a way, spark greater trust of the Administration on trade and greater interest in moving forward in Congress to approve NEMA-supported free trade agreements that would provide advantages for U.S. companies in South Korea, Panama and Colombia. Whether that will come to pass remains to be seen. There is an ongoing chorus calling for greater enforcement of U.S. trade agreements. But President Obama has certainly taken a step that cheers the many Members of Congress who favor protection of U.S. industries and want more jobs for U.S. workers but who have never voted for a trade agreement and don't plan to anytime soon.

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