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Need To Get A Grip On Tires

Posted By Derek Scissors, Ph.D. On September 17, 2009 @ 10:28 am In International | Comments Disabled

There is one, and only one, notable development in the Chinese tires case [1]. The rest is old news, non-news, or nonsense.

Why does anyone care about this case? It’s certainly not because of the amount of trade affected. Replacement tires constitute a drop in the bucket of US-China trade.

It’s not because it will dent US unemployment. Three years of tariffs on tires from one country will do almost nothing for production in the US.

It’s not because of the potential Chinese reaction. The level of grassroots interest in this is nothing like the level needed to actually worry the Party. The Ministry of Commerce will use domestic politics to justify demands or actions, but it is a negotiating tool in this instance, nothing more.

The PRC has far too much to lose in a genuine trade confrontation with the US. And low-end tire tariffs hardly prevent Chinese trade policy from proceeding on its merry way – simultaneously seeking to locate jobs at home and move up the technology chain for strategic reasons. The difficulty of doing both simultaneously necessitates not only distortions of comparative advantage, but a broadly mercantilist model for most of the traded goods sector. This approach is not threatened in the slightest by replacement tire tariffs.

The case is not even a notable development in US policy at the operational level. The International Trade Commission has been slapping tariffs on Chinese goods at the rate of nearly two products per month. The notion that the USTR conducted serious negotiations offering to halt tire tariffs for substantial Chinese reform is silly – it will take much, much more than that to alter Chinese trade practices.

The only reason the tire tariff matters is the precedent that it may create. Will there be more safeguard cases? Will other unused weapons in the American trade arsenal be trotted out against the PRC?

One source of risk, of course, is the Congress. But Congress has been remarkably restrained in the face of near 10 percent unemployment. In any case, the legislative branch is expected to agitate for protection; it is the executive branch which defends the national interest in open trade.

Here lies the true reason for all the face. The tire case may be the first real insight into President Obama’s views on trade with China. It may be because, eight months into his term, we have neither a strong philosophical statement nor a set of practical details from a President who has repeatedly shown the ability to offer both.

President Obama clearly doesn’t want to say anything more about trade than he has to. That is an abandonment of his responsibilities. The uncertainty created is what has sparked the near-frenzy over a possible trade conflict.

The sole important aspect of the tire case is the fact that, despite the perfect opportunity, President Obama still refuses to tell the country and our partners what he thinks about China trade. No more empty or contradictory soundbites, sir, time to lay it on the line.


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URL to article: http://blog.heritage.org/2009/09/17/need-to-get-a-grip-on-tires/

URLs in this post:

[1] the Chinese tires case: http://online.wsj.com/article/SB125292818818208401.html

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