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President Obama Opens a Trade Dispute with China:
Safeguard Tariffs Imposed on Chinese Tires
On September 11, 2009, when President Obama signed Presidential Proclamation No. 8414 imposing stiff tariffs of 35% ad valorem on imports from China of certain passenger vehicle and light truck tires, the United States launched a major trade dispute with one of our biggest trading partners.
This action was taken under the authority of the so-called "Chinese Safeguard" statute, also referred to as section 421 of the Trade Act, [19 U.S.C. 2451(f)], which was implemented on China's admission to the World Trade Organization in 2001 as a "safeguard" against imports from China that cause "market disruption."
While the Obama Administration took pains to deny that it was engaging in any acts of trade protectionism, and declared that it was committed to "open and free trade," many analysts believe that Obama's move could "take him down a road fraught with risks" and open him to demands from labor unions or U.S. manufacturers for other tariffs on a wide array of Chinese products. (The Wall Street Journal, (WSJ,) "White House defends steep tariff on Chinese tires," September 13. 2009, p. A9).
After imposition of the safeguards, China struck back at the U.S., claiming that the safeguards violated World Trade Organization rules, and indicating it would restrict U.S. imports of chicken and auto products by filing anti-dumping procedures against U.S. exporters of those products.
The President's decision came about after the U.S. International Trade Commission recommended a 55% tariff in an appeal brought by the United Steelworkers union, giving rise to the view that Obama's actions amounted to a fulfillment of campaign promises, and were taken to maintain support of his health care agenda from organized labor. President George W. Bush had rejected the ITC recommendations in all such cases that had crossed his desk.
Many analysts believe we can now expect to see a fresh round of U.S. industry complaints against Chinese imports seeking safeguard tariffs on a whole host of products including socks, cotton trousers, jeans, knit tops and coated paper. According to trade policy watchdogs, (see WSJ editorial "A Protectionist Wave," September 13, 2009), other product categories that have seen import surges, and are therefore liable for industry complaints, include shoes, lawn mowers, television monitors, hearing aids, musical instruments like keyboards and guitars, women's underwear, blouses and t-shirts, and bras.
The President's action will surely please some of his political constituencies. But it is also likely to cause long-term problems for relations with our trading partners, for American consumers, for US businesses injured by retaliatory measures, and for US import-related jobs.
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