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  • Free Tread

    President Obama has decided to apply heavy tariffs to passenger car and light truck replacement tires made in China. This is the latest and worst episode in an ill-advised assault on free trade with the PRC.

    Taking WTO-compliant steps to counter Chinese subsidies or other mercantilist behavior is entirely reasonable. (That doesn’t mean any WTO-compliant action is a good idea — the “Buy America” provisions passed as part of the stimulus package may be WTO-compliant but are still terrible policy.) The problem here is that American actions are occurring in a policy vacuum. Our actions appear to be driven by domestic politics, a dangerous development given the importance and complexity of our trade with China.

    The tire case has general trade ramifications; it also bears specifically on the PRC. Since the beginning of President Obama’s term through the end of August, the U.S. International Trade Commission has made preliminary or final recommendations to impose or keep tariffs in 25 cases. Twenty-two of these impositions include China. This continues an unwise targeting of the PRC that began in July 2008 under the Bush administration.

    President Obama made a mistake.

    Presidents must consider the entire country, not just a particular group in a particular sector. In that role, Presidents often clash with the Congress, where districts and states have disproportionate weight on certain issues. The tire case stems from a provision created by Congress to permit tariffs ostensibly to protect against import surges from China. Six previous attempts to invoke the provision failed under the Bush administration, four times rejected personally by President Bush.

    In this case, President Obama abdicated his responsibility to the national interest. A flood of complaints against the PRC will follow from unions and the Congress. Most of these will be misguided and some will be outright dangerous. As an illustration, the tires being targeted by this tariff sell at low prices. Now, poorer people face paying more during an economic slump.

    The best course would be for the President of the United States to reject specific unilateral targeting of the PRC. It is now imperative for President Obama to present his vision of trade with China, one which is built on the principle of open trade, not stealth protectionism, narrow interests and punishing the poor.

    Posted in International [slideshow_deploy]

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