President Barack Obama, after a year of avoiding taking a stance on trade, will have to stop dodging with end of his summer vacation, when a decision is required that could spark an open trade war with China.
At issue is an import-surge complaint, filed in April, against vehicle tires made in China. The suit is the largest of its kind, involving US$2.2 billion in trade. Lower-ranking United States officials have issued a ruling that would slap punitive tariffs, starting at 55%, on tires imported from China. The US Trade Representative (USTR) submitted his final recommendations this week, and Obama must make a final decision by September 17 on whether or not to press forward with sanctions.
Normally, petitions claiming unfair trade are brought by strugglingUS manufacturers, but this one is unusual. It was filed by a labor union, the United Steelworkers, who represent workers in about half of US tire-making plants. US tiremakers themselves – the companies that would supposedly be protected – oppose the union-initiated petition.
The tire dispute is a high-profile issue in China, taking up space on newspaper front pages, and Chinese officials have vowed to retaliate forcefully against any tariff the US imposes. They see it as a betrayal of American commitments to free trade and an ironic twist on US efforts to open Chinese markets.
The China Daily English-language website, for example, reported that “unions are an active and important political factor for the first-year president, having reportedly donated approximately $400 million to his election campaign.
Chinese tire manufacturers “largely do not compete against their American counterparts in the US”, but target “the budget and no-brand replacement tire market for US consumers with severe budget constraints” – So says the China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters.
Nor are Chinese tire imports into the US rising suddenly, gaining only 2.7% last year and declining in the first quarter this year, China Daily said. The report contrasts this with Chinese imports of more than $1 billion worth of automobiles from the US in the first six months this year, a 9.1% gain on the same period last year.
The Chinese aren’t the only people watching with great interest. South Korea, Colombia and Panama have all signed free-trade agreements awaiting Obama’s decision to submit them to congress. These and other trading partners are looking for signs of how they will be treated by this administration.
