Obama treads a difficult path with Chinese tyre tariffs

One aspect of the global trade recession in 2008-09 has been the resurgence of protectionist tendencies as countries have lined up to introduce fresh barriers to trade in goods and services. The pressures for import protectionism in the form of tariffs, quotas and other barriers is largely driven by politics and there is a new example to dissect with the news that the US government is to raise the import tariff on low-grade Chinese tyres following a petition filed by the United Steelworkers trade union, which represents workers at many US tyre factories. Chinese exporters will be subject to 35% import tariffs (taking effect on September 26th) which will decline to 30% in the second year and 25% in the third.

Here is some background on the dispute - drawn from articles in the Wall Street Journal, the Times and the Financial Times.

*Between 2004 and 2008, China’s tyre production capacity surged by 152% and is projected to jump an additional 16% by 2010.
*At 235.2 million tyres, China’s production capacity in 2008 was more than three times greater than its supply to its home market.
*US. imports of tyres from 2004 to 2008 jumped from 14.6 million to 46 million. China’s share of the U.S. tyre market increased to 16.7% from 4.7%.
*Four U.S. tyre plants closed in 2006 and 2007. There were 5,168 fewer workers in the U.S. tyre industry in 2008 than there were in 2004.
*US tyre manufacturers did not petition for higher tariffs - most have long since left the market for low-grade tyres for autos and other vehicles.
*The Chinese government claims that the tariffs will cost upwards of 100,000 jobs in China and perhaps 100,000 tyre-related jobs in America, including such sectors as imports, distribution and retail

Suggestions for background reading:

Times: Crunch time as Obama faces trade dilemma

China Daily: US tire tariff may cost 100,000 jobs in China