Finally, a President with the Guts to Enforce Trade Laws
Barack Obama proved Friday he's got grit. He enforced trade laws.
These are special trade safeguard rules called "Section 421" that the Chinese had agreed to obey to gain entrance to the World Trade Organization (WTO). They are, however, laws that had gone unenforced by the U.S. in the past.
President Obama used these safeguard rules to impose tariffs on tires manufactured in China and imported into the U.S., following a recommendation by the International Trade Commission, an independent, bi-partisan group. The action made Obama the first president to execute sanctions under "Section 421."
The International Trade Commission recommended sanctions under "Section 421" four times before Obama took office. Nothing was done. The result was closed American factories, lost American manufacturing jobs, diminished American dreams.
Not this time though. Not this president. Obama showed he's made of tougher stuff. By placing tariffs on imported Chinese tires, President Obama put himself in the line of fire for the jobs of U.S. workers, for the preservation of U.S. manufacturing and, ultimately, for the stabilization of the U.S. economy.
Don't kid yourself. This is a battle. For the U.S. to maintain a viable economy, it must sustain a strong manufacturing base. It must make products of value that can be sold here and overseas -- not just swap paper, some of it bogus on Wall Street.
The U.S. economy is under attack by countries engaging in unfair trade. In the past decade, we've lost 40,000 manufacturing facilities. In just the 21 months since the Great Recession began, more than 2 million manufacturing workers have lost their jobs, making their unemployment rate 11.8 percent, significantly higher than the 9.7 percent rate for the average worker.
That's what the Chinese tire case was all about. My union, the United Steelworkers (USW) filed it in April. We demanded penalties against China because it has smothered the U.S. market with tires. In 2004, its share of the U.S market was 4.7 percent. Four years later, it was 16.7 percent. In that time, the number of tires it sold rose from 14.6 million to 46 million. As a result, four U.S. tire manufacturing plants closed and 5,100 workers lost their jobs. Another three plants will close before year's end, throwing 3,000 more U.S. workers on the street.
We filed for relief under "Section 421" for two reasons. One is that it provides quicker relief than other trade remedies. The other is that China consented to its provisions. When China wanted to get into the World Trade Organization in 2000, it secured U.S. support by agreeing to abide by Section 421 until 2013. Section 421 was designed to protect the U.S. economy by providing ways to combat unfair and damaging surges of particular Chinese imports.
In the past, corporations had asked for Section 421 tariffs. And we had joined them. This time, not one tire company joined us, though, to be clear, Goodyear was openly neutral. By contrast, Ohio-based Cooper fought us. As did a collection of rag-tag import firms, one of which had nearly gone bankrupt after importing defective Chinese tires that had to be recalled after a series of crashes.
Cooper, in testimony to the International Trade Commission, reported that all of the tires it makes at its Chinese plant, under its licensing agreement with the Chinese, must be exported until May, 2012. So it has a clear financial interest in preventing tariffs on imported tires to the U.S. The tire import companies have the same interest. For them, it's about the money they make today, no matter how or where it's made. They've got no allegiance to the U.S. and don't care what happens to America's future manufacturing capability or financial stability.
President Obama, by contrast, is a patriot who sees the big picture and takes the long view. U.S. Sen. Sherrod Brown of Ohio was right when he said after the tire tariffs were announced:
"Today the President courageously stood up and enforced fair trade rules that will save jobs and help our communities. Since China joined the World Trade Organization, American workers have not been assured that the government would defend them against unfair trade. With this "Section 421" decision, President Obama has taken the side of American workers and manufacturers.
"Rigorous trade enforcement is a major piece of our manufacturing and global competitiveness strategy. If American workers and manufacturers are going to compete in the global market, they need to have a government that uses trade enforcement tools, including the Section 421 safeguard."
American workers and American manufacturers can compete -- when trade is fair. It's unfair when countries don't enforce their own labor regulations, including their own minimum wage laws. It's unfair when U.S. companies abide by strict environmental regulations and those in other countries openly pollute air and water. It's unfair when other countries allow their firms to steal trade secrets, when other countries demand that firms export all of their products for a certain number of years and when other countries manipulate the value of their currencies.
If trade laws aren't enforced, America will lose virtually all manufacturing and become nothing but a dumping ground -- a place where the rest of the world sells the stuff it makes. Fewer and fewer citizens in that America would be able to buy stuff after the factories close and all the jobs that they support disappear.
In announcing the tire trade sanctions -- tariffs of 35 percent for a year beginning Sept. 26, 30 percent for a year after that, and 25 percent in the final year -- U.S. Trade Representative Ron Kirk said, "Enforcing trade laws is key to maintaining an open and free trading system."
Unfair trade isn't free.
President Obama is bold enough to draw that line of distinction for America.
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My money is on him caving in shortly.
actually, don't forget the Chinese are our bankers!!!
the goverment owes them so much that this is a very stupid move.
Manufacturing is going to be our savior and way out of this Great Recession.
The chicken producers are clucking this morning......................
What could feel better than an honest day's work and kicking your banker in the shins?
Violating the trade law was the whole point of China agreeing to it. That's how "free" "trade" has worked for decades.
I think you will like the economist Brad DeLong's response to Harold Meyerson's attack on President Obama's decision.
Brad sets the record straight nailing Meyerson with this:
"Harold: you need to provide people with the right numbers--which are that Chinese tires rose from 6 to 20 percent of U.S. purchases."
Logically President Obama is doing what Section 421 allows. It gives the U.S. the right to impose tariffs in response to a surge of Chinese tires!
For the rest of the article: http://delong.typepad.com/
Oh no! They must be dropping them out of planes! We must punish those who give us cheap things!
You mean like GW and steel tariffs?
Meet the new boss. Sam as the old boss.
Environmental and labor standards can be upheld only if the cost of upholding them is applied to all products. There's nothing protectionist about applying environmental and labor standards to imported products, and charging offset for those that don't meet them. If foreign competition meets the standards, the offset goes away.
Obama said this quite clearly during the election campaign, but nobody was listening. The protectionists and the free-traders equally heard him as advocating protectionism.
Wasn't this one of the things that exacerbated the Depression, a round of trade protectionism that global trade to a screeching halt, or does everyone think the Chinese are just going to take this without any sort of response/retaliation?
Second point, do we really want to piss off our banker just protect our own industries? Even if the legal case is sound, you have to question if this is the smart thing to do for the economy as whole (although it would obviously good for the local tire industry)
An international trade commission ruled that the Chinese violated our trade agreement. They had ruled this way 3 times before. President Bush each time chose to do nothing. This is not protectionism it is not getting taken advantage of. The Chinese were dumping tires on us in order to undercut us and put our tire manufacturers our of business. Once our tire manufacturers are put out of business then they would be free to jack the price.
If we don't manufacture anything, the only thing we will have to export is gold. That is not a sustainable economic situation.
there is no credible evidence that Smoot hawley had any effect on the depression good or bad. suggestions of this are pure globalist fairy tales
Even Noble Laureate Krugman who has written extensively on free trade agrees he says right on his website any attempts to suggest that Smoot Hawley had any causal effect on the depression are inaccurate and revisionist
The chinese are launching a dumping investigation on US chicken - let em they won't find anything.
they no better than to bite the hand of their biggest customer - they need our market for their cheep goods. and any attampts to sell off treasuries hurts them as well
bout time we took a tougher stance on china's unfiar trade - its a start - and one that does not go far enough
good point !
The same Nobel Laurete Krugman who called for the Fed to create a housing bubble? Great source.
Have you people ever taken a single class in Economics or even read the wikipedia entry for Comparative Advantage? This is simple stuff. Get a clue.
Why wouldn't they find anything? US agribusiness is the single most subsidized industry in the entire United States. Of course China's known all along that almost all our farm output is subsidized one way or the other but since their people want cheap and affordable chicken they're usually willing to ignore it.
But there's a reason why China picked on the chicken and auto parts and it's because they happen to be industries that are indeed being subsidized either directly or indirectly.
I mean come on we bailed out our automakers-largely to keep our auto parts suppliers in business. And there's a whole bunch of other financial support flowing to auto parts makers to try and keep them in business. Even a 4th grader could make the case that auto manufacturers and auto parts manufacturers are being supported by the US government.
Either way trade wars hurt both parties involved-I mean essentially if we both slap tariffs on each other the only end result is that Chinese people don't get cheap chicken and we don't get cheap tires. They lose jobs making tires we lose jobs making auto parts and farming chickens. And not so surprisingly China targeted industries that happen to have exports to China approximately equal to their exports of tires to the US.
I highly suspect that this will all get negotiated down in the end because trade restrictions in a recession...
So are you advocating we should go ahead and accept defective, predatorily priced Chinese tires on our cars and take no remedies to stop them?
You first.
You can always, you know, buy from the 80% of our tires made here.
Defective? Funny how I don't recall any major recalls of Chinese tires in the US (most of which happen to be made by American tire companies at their Chinese plants). And seriously have you entirely forgotten why Firestone had to be sold to the Japanese?
Talk about the pot calling the kettle black, jeez.
Good, a start. However, the Chinese won't like it. We need more tariffs, especially for our companies that go overseas and then turn around and bring back their wares for us. The Chinese have bought us by loaning us money, without them, where would we be? And it seems our president has no power at all, he gets blocked by everyone and everything, I have to ask, just who is running this country anyway. Fix Wall Street, the derivatives and the hedge funds and CEO Pay. I have never seen another time where our president had so little power and so little respect.
Great. So now only AMERICAN companies can manufacture tires in China.
O yea, and this ignores the 50 other countries that can produce tires at the same price as China.
Does anyone posting here really see great prospects in a job at a tire factory? Dey took R jobs!
And for those complaining about China's policies toward trade. Just because they choose to cut off their hand doesn't mean we should show up and rip out their arm. If they want to hamper their own economic growth through currency manipulation they will be the ones stuck with Trillions in worthless US greenbacks they have no chance of spending.
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Some people call this protectionism but that is a misnomer - It is levelism.
Levelism uses tariffs to compensate for the unfair advantage gained through low wages, low environmental standards and manipulated exchange rates.
If this were protectionism it would apply to all countries, but it does not. The high wage, high environmental standard and floating currency European Union is unaffected.
http://corporate-statesmen.org/images/LEVELISM.pdf
This is how we stop the race to the bottom.
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This article is encouraging for US manufacturing workers.
I wonder if anything is being done about the non-manufacturing jobs (like IT) that have been sucked out of this country and into the BRIC countries (Brazil, Russia, India, China) ? BRIC workers cost a fraction of US workers because they live in poverty, have (inferior) nationalized health care, and little to no labor laws protecting their safety and human rights.
You get what you pay for. Smarter Planet? I doubt it, more like a Cheaper Planet.
Let's see how those supply chain systems work when completed by barely trained, massively hired, 3rd world IT workers. I'm guessing like a made-in-China tire blowing while you're driving at 65 mph down the IT Super Highway. Gives a new meaning to Cloud(y ) Computing doesn't it?
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People in other countries are as smart and well trained as Americans.
Hubris will not serve us well.
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Woof woof, the point I guess I didn't make is that - IF you read what the blogger employees are saying (i.e. not the corporate PR statements), the quality is NOT the same and many (not all, I'll agree) of these BRIC employees are untrained and not as good. It's an immediate cost cutting play which has deeply hurt the skilled American workforce, mostly those over 40 (aka "higher family health and retirement costs"). Of course BRIC workers area as smart and capable as the US workers - to say otherwise would be bigotry - but currently the hundreds of thousands of them are struggling to learn the technology and processes. Do it gradually, in phases, where quality and risk can be controlled - not all at once (like what IBM did - chopping 10,000 US workers and adding 20,000 in India within the first half of 2009). Thanks for letting me elaborate..... seriously, check out what the people in the trenches are saying about these BRIC workers. My point - you get what you pay for, either a cheap tire or cheap system that runs your country's food supply.
Sure, they're just as smart and possibly even more schooled. But may not be as "well trained".
If you had $1000 to spend to make microwaves with and you know you could either make 5 of them for $200 each in the US or 20 of them for $50 each in China, it would make a lot more sense to make them in China and sell 15 to people in France and Australia and Brazil. The profits come back to the US anyway. It makes a lot more sense than insisting on making 5 super expensive microwaves that no other countries will buy and then forcing it down the throats of US consumers. The people who lost manufacturing jobs making those 5 microwaves can do other jobs because you made a lot more money this way, money you can spend.
A manufacturing economy isn't the only economy. It's dimwitted to insist that we have to make everything ourselves no matter how uncompetitive we are. Do you think other countries would buy microwaves from us if we still made them? Even without China there'd be Japan, South Korea, Brazil, Mexico, etc.
You know what? When someone in Japan buys a made in China iPod the United States makes money. When someone in Europe buys a PC made in China with Microsoft Windows and an Intel chip (made in Malaysia) the US makes money. We make money based on our intellectual and technological superiority. Why insist on making money machining screws?
Nice dog too .....
Wait...so because people in other countries are poor...we should refuse to give them any business so that they stay poor forever? Genius.
Have you maybe considered that if they become non-poor that they can then proceed to have money to spend?
And you know for all the whining about the trade deficit with China...you idiots do realize that while there's a trade deficit in terms of products being shipped back and forth, that the money being paid for a lot of the products being shipped out of China is being paid to American companies?
Where do you think the money goes when you buy an iPod that's made in China? Sure that $299 iPod gets counted in the trade deficit but the vast majority of the profits goes to Apple, not to the Chinese assemblers.
The sheer idiocy of this insistence that we manufacture everything ourselves is mind boggling.
This is great news. Now if Obama would do the same to the goods Walmart manufactures out of China our unemployment rate would drop from 9% to -4%. Yes -4%.... meaning we'll need to train apes we'll have so many jobs.
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