By a 4-2 vote, the U.S. International Trade Commission (ITC) has moved forward on a Section 421 petition from the United Steel Workers (USW), ruling that a surge of low-priced and unfairly traded consumer tires from China is harming the domestic industry.
The Tire Industry Association (TIA) opposes the union’s quest.
“TIA believes that the proposal before the ITC would be the worst of both worlds – no U.S. manufacturing jobs would be either saved or created, and consumers would be denied a source of affordable tires at a time in our economy when every penny counts,” says TIA Executive Vice President Roy Littlefield.
He goes on to note that “any reduction in the quantity of tires imported from China would be in and of itself disruptive, as no manufacturing uptick here in the U.S. would satisfy the shortage this measure would create. Instead, manufacturers would have to essentially ration their products, thus resulting in shortages, outages, and most likely, much higher tire prices.”
The USW counters that China’s import influx has caused major job losses and plant closures in the U.S.
“Our domestic industries cannot survive unless our government enforces the trade laws designed to curb and dissuade anti-competitive practices that cause market disruptions,” says USW International President Leo W. Gerard. “We anticipate the remedies that will be delivered to President Obama will allow the time necessary to rebuild the U.S. tire industry.”
Obama, who made a campaign pledge to crack down on China’s allegedly unfair trading practices, will make the final determination on imposing trade relief.
The USW filed a petition with the ITC on April 20 under Section 421 of the Trade Act of 1974. Section 421 is a temporary country-specific safeguard that China agreed to as part of its bilateral trade negotiations with the U.S. leading to its 2001 membership in the World Trade Organization.
The USW petition claimed that imports of consumer tires from China increased from 2004 to 2008 by 215 percent in volume and 295 percent by value. In 2008, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S., making it the largest source of consumer tire imports. While imports nearly tripled by volume during the surge period, domestic production of consumer tires declined by more than 25 percent.
During that time, nearly 5,100 U.S. tire workers lost their jobs as a result of massive erosion in the domestic production coinciding with the massive increases in imports, according to Gerard. About 3,000 more jobs are slated to be lost by year’s end as three plants are threatened to close, he adds.
The USW says that the government should impose an import quota on China of 21 million tires for cars, light trucks, minivans and SUVs per year. This would return Chinese tire imports to a 2005 level and allow for an increase of 5 percent per year over a three-year period.
“We anticipate that the final decisions on remedies will improve domestic job security, increase production and sales, and allow for investment in capital equipment to better compete in the global market for the long term,” says Tom Conway, the USW International’s vice president.
Conway, chairman of the bargaining committee at Goodyear, said the company has warned the union since 2003 that low-cost imports were threatening its North American operations. “USW-represented tire workers have made painful concessions and the union bargained hard to make sure our plants received the capital investments to stay on the cutting edge of technology and innovation. Without strong remedies from the President, our work will be for naught and the opportunity to build a stronger domestic industry will be lost.”
The TIA insists that a production reduction of this magnitude “would itself create a market disruption, and cause very real harm to our member companies and the U.S. consumer. Our members, by directly importing or contracting with suppliers, are meeting the demands of a segment of the tire consumer market for lower-cost tires. No manufacturing uptick would satisfy this product segment, but instead could create a need for product allocation, resulting in shortages and outages. In the best of times such occurrences are troubling, but in today’s climate could inflict severe financial harm on many retailers and on the motoring public.”
The tire industry organization says the ITC has the ability to guard against foreign governments supporting the sales of below-cost products, applying anti-dumping remedies when appropriate. In addition, the TIA “has long supported requiring that all Chinese tires adhere to applicable Federal Motor Vehicle Safety Standards.”
The TIA further favors a free-trade policy, calling on the ITC to “reject the USW’s effort to impose a protectionist policy.”
For more information, visit www.tireindustry.org. The USW has prepared a video on the case, which can be viewed, along with other information, at www.usw.org/tires.
