US Trade Panel Recommends Sizeable Tariffs Upon Chinese Tyres

Duties of up to 55 per cent may be imposed upon Chinese tyres imported into the US in an attempt to reduce their effect on local manufacturers. On June 29 the US International Trade Commission ruled 4 to 2 in favour of imposing tariffs upon passenger car and light commercial vehicle tyres imported from China for a three-year period. Proposed duties for the first year have been set at 55 per cent of the tyre’s value, while in the second and third years the rate would drop to 45 and 35 per cent respectively. These tariffs would be charged on top of the current rate of duty.

“In our opinion, these tariff levels would remedy the market disruption that we have found to exist,” read a statement released by the four commissioners who voted in favour of the tariffs. However the two who voted against it – Vice Chairman Okun and Commissioner Pearson – cautioned that “implementing a trade restriction would be far more likely to cause market disruption than to alleviate it.” They added that worldwide tyre industry downsizing would continue in spite of the commission’s decision, and the US government should be ready to assist tyre workers who are made redundant.

Following the announcement, the US based unit of GITI Tire expressed its disappointment in what it sees as a “protectionist decision by the International Trade Commission.” In a statement, executive vice president of GITI Tire’s US operations, Vic Delorio, said “we are disappointed that four of the six ITC Commissioners today felt compelled to take a decidedly protectionist path and recommended that the US government impose an additional duty against economy tyres made in China. The proposed remedy if enacted will not help US workers. Chinese-made tyres have filled a market void created when US manufacturers abandoned the economy segment of the mass market.

“The duty will not have the effect of increasing domestic production of low-cost tyres – it simply will not help US workers,” Delorio continued. “Rather, the result will be that American tyre manufacturers will continue to focus on premium tyres, as they have said they will do. If there is a barrier placed on tyres produced in China, US manufacturers and distributors will simply increase importation of tyres from other countries, such as Venezuela. What’s more, duties will result in higher tyre prices for American consumers at a time when they can ill afford it.”

According to GITI’s Delorio, the ITC should have focused on helping the domestic tyre industry innovate and upgrade their facilities. The commission should also, he said, have directly addressed complaints about foreign labour and environmental standards and fashioned a recommendation for the Obama administration that moves the Chinese tyre industry as a whole to improve labour and environmental standards in their manufacturing facilities.

The United Steelworkers, as expected, have applauded the ITC’s decision. “Today’s remedy vote by the ITC is a great victory for the USW, its members and for all US tyre workers,” declared USW international president Leo W. Gerard on June 29. “The tariffs voted by the commissioners should remedy the market disruptive surge in Chinese tyre imports that have caused harm to the domestic industry.”

Tom Conway, USW international vice president and chair of bargaining at Goodyear Tire and Rubber, added: “Both our own economic analysis as well as that of the ITC show that the recommended tariffs will have significant beneficial effects for the domestic industry. We applaud the Commission’s decision and look forward to working with the Obama administration to see that it is fully implemented.”

The ITC’s decision is not binding. President Obama has until September to consider the proposed course of action. It’s approval is by no means assured, particularly considering that a day before the ITC made its decision Obama stated “at a time when the economy worldwide is still deep in recession and we’ve seen a significant drop in global trade, I think we have to be very careful about sending any protectionist signals.” The President’s predecessor, George W. Bush, rejected every recommendation the ITC sent him.