Obama’s Bold Economic Move on Chinese Tire Imports is Paying Off

With the approaching one-year anniversary of President Obama’s decision to provide relief on imports of Certain Passenger Vehicle and Light Truck Tires from China, under Section 421 of the trade law, it is appropriate to look at the impact his actions have had on the domestic industry and its employees. After a finding by the U.S. International Trade Commission that the statutory requirements for an affirmative decision were met and a recommendation for three years of import relief was made, the Obama administration determined to provide three years of relief to the affected workers, firms and their communities who had been injured from a flood of Chinese tires.

Because of the massive distortions to international trade that can occur because of the state control of the Chinese economy, Section 421 was included as a critical component to an expanded trade relationship with China to ensure that American companies and their workers didn’t face injurious surges of imports while China continued to go through an economic transition in its system. As part of its negotiations with other trading partners, China accepted the right of World Trade Organization (WTO) members to use such a safeguard mechanism against its imports for a period of 12 years after it joined the WTO while it was bringing its system more fully into compliance with WTO obligations. The 421 decision by President Obama is the first time in the United States that relief has been provided to a domestic industry and its workers.

Section 421 was an important commitment made by the Chinese to facilitate its entry into the WTO. This provision was designed to facilitate the mutually beneficial growth in trade by reducing the adverse effects of distortions inherent in China’s non-market economy. Rules such as Section 421 are vital to further liberalization of trade, not antithetical to it. Indeed, the WTO is a body of rules negotiated by the members of that organization to ensure that countries are able to respond to unfair and predatory trade practices as well as activities of non-market economies.

The basic objective of the relief provided under Section 421 is to give the domestic industry and its workers breathing room from surging imports. It is also to permit adjustments to be made in China’s system on the distortive practices that fueled the surge to begin with. The United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers (USW) identified during the hearing in front of the United States Trade Representative and other governmental agencies a host of distortions in the Chinese economy long recognized by the government and by businesses that needed to be addressed including exchange rate management, support for state-owned enterprises, massive subsidies, state banks propping up industries, WTO-inconsistent requirements on investors to export, WTO-inconsistent technology transfer requirements, industrial policies and other non-tariff barriers.

Section 421 was enacted by Congress after negotiations with, and agreement by, China that it was an appropriate tool to address surging imports after China’s accession to the World Trade Organization. Section 421 was a critical element of the congressional implementation effort recognizing that Chinese non-market activities could seriously disrupt and injure American producers and their employees.

While those who oppose the use of internationally agreed rules have claimed failure of the remedy, their claims ignore the reality of the success that has occurred and the clear statutory purpose.

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