By Mark Drajem
Sept. 14 (Bloomberg) -- President Barack Obama’s decision to place tariffs on tires from China may be the opening move in a campaign for fewer trade barriers, based on the strategy used by his four predecessors.
Obama announced duties Sept. 11 of 35 percent on $1.8 billion of automobile tires from China, acting on a complaint by the United Steelworkers union that surging imports were pushing U.S. factory workers out of their jobs.
Former Presidents Ronald Reagan, George H.W. Bush, Bill Clinton and George W. Bush each took action to protect domestic industries early in their terms before making free trade a focus. Obama, like Clinton, has the added challenge of trying to satisfy trade-wary Democratic lawmakers and the unions that helped them win election.
“It does buy him some credibility with Congress,” said William Reinsch, president of the National Foreign Trade Council, which represents exporters such as Boeing Co. and Microsoft Corp. The decision to impose tariffs may improve the prospects for congressional acceptance of new trade accords sought by the administration, he said.
Agreements with Colombia, Panama and South Korea have been stalled in Congress in part because of Democratic opposition.
China “strongly opposes” Obama’s decision to impose tariffs and may refer the case to the World Trade Organization, that country’s Ministry of Commerce said Sept. 12. China also announced yesterday probes into subsidies for imported U.S. chicken and auto products.
‘Save Jobs’
The case brought by the steelworkers union was the largest so-called safeguard petition filed to protect U.S. producers from increasing imports from China. Union leaders and Democratic lawmakers said the decision demonstrates Obama’s commitment to protecting U.S. workers and jobs.
“The president courageously stood up and enforced fair trade rules that will save jobs and help our communities,” Ohio Senator Sherrod Brown said in a statement after the decision.
In 1983, Reagan imposed duties and quotas on steel imports, and George H.W. Bush extended them in 1989. Clinton cracked down on autos and auto part imports from Japan. George W. Bush imposed a global safeguard on steel as he sought political support in West Virginia and Pennsylvania.
The presidents later worked to cut trade barriers and pushed for new trade agreements such as the North American Free Trade Agreement, which was negotiated in the first Bush administration and passed Congress under Clinton.
Reagan, Clinton
The trade negotiations that led to the WTO were conceived under Reagan and implemented under Clinton. China’s entry into the WTO got congressional approval under Clinton and was completed in the second Bush administration.
Obama’s willingness to act on tire imports may produce a flood of trade complaints seeking action against China, according to Derek Scissors, a research fellow for Asia Economic Policy at the Heritage Foundation, a Washington public policy group.
Lewis Leibowitz, a lawyer at Hogan & Hartson in Washington who represents U.S. consumers of imports, said such complaints may be limited because imports of most products from China are down this year due to the recession.
The global integration of U.S. companies makes it less likely they will join unions in seeking to block imports. In the tire case, Goodyear Tire & Rubber Co., the largest U.S. tiremaker, stayed neutral. Cooper Tire & Rubber Co., the second- largest U.S. tiremaker, opposed the relief. The company has a plant in China.
‘Unfair Trade’
The initial reaction from China, the U.S.’s second-largest trading partner after Canada, indicates an exchange of trade penalties may follow. China’s exports to the U.S. were $252 billion last year, compared with $81.4 billion of imports, according to Chinese government figures.
Chinese industries complain that they’re being hurt by “unfair” U.S. trade practices, the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is probing complaints about U.S. subsidies for auto and chicken products, a spokesman said today. The agency is also probing the alleged dumping of the chicken products, he said.
The U.S. decision on tires violated rules of the WTO and is a breach of the commitments made by the U.S. at the Group of 20 summits, the ministry said Sept. 12. The move will harm both countries’ interests and produce a chain reaction of trade protectionism, slowing world economic recovery, it added.
Opposing Reactions
Obama may hear opposing reactions to his decision on tire tariffs at two events in Pittsburgh in coming days. Tomorrow, he is set to address the AFL-CIO, the largest U.S. labor federation, which praised the action.
Next week, Obama will see China’s President Hu Jintao. The leaders are scheduled to attend a G-20 summit, also in Pittsburgh.
Obama’s decision is unlikely to result in the return to the U.S. of jobs producing low-cost tires, said Scissors of the Heritage Foundation and Mickey Kantor, a former U.S. Trade Representative in the Clinton administration. Instead, tariffs could shift production from China to other developing nations.
“U.S. companies have gotten out of this business in the United States,” Kantor said in an interview. “And I don’t think they are going to invest back here because of a three-year safeguard.”
The independent U.S. International Trade Commission recommended that Obama impose duties for three years, starting at 55 percent, to counter a tripling of tire imports from China from 2004 to 2008. The union, which represents 15,000 employees at 13 tire plants in the U.S., said cheap imports were forcing factories to close, eliminating jobs.
To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net
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