Will tire tariffs launch a trade dispute ?
On September 11, 2009, the Obama administration announced its decision to impose punitive tariffs on low-end tire imports from China under a statute known as Section 421 of the Trade Act of 1974. In addition to an existing 4 percent import duty, tariffs were increased by rates of 35 percent for the first year, 30 percent the second year, and 25 percent the third year because imports of Chinese tires were deemed to be excessive. China's government responded quickly to the announcement, saying in a statement that it "strongly opposes" what it called "a serious act of trade protectionism." China agreed to be subject to Section 421 as a special concession when it joined the World Trade Organization (WTO) in 2001. The statute allows the United States to impose duties or quotas to counter “market disruption” caused by rapidly increasing imports from China.. In other words, if Americans simply buy enough of a product from China to drive up imports, the requirement can be met. The United Steelworkers union argued that the tariffs would restore US jobs and increase US production of low- end tires.But do trade tariffs create jobs? Were tariffs the right or wrong remedy? I think it might be the wrong remedy. US imports of the low-end tires involved in the case have actually increased substantially since the tariffs were imposed—but have shifted from China to other countries. And, there is no objective evidence that the tariff boosted US tire manufacturing jobs. China's commerce ministry also announced that it would start investigations into whether the United States is subsidizing automotive and chicken meat exports to China to respond to US investigations.
The impact of the dispute extends well beyond tires, chickens and cars. Both governments are facing domestic pressure to take a tougher stand against the other on economic issues. And the trade battle increases political tensions between the two nations even as they try to...
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