How will you spend your Thanksgiving break?
President Obama announced new tariffs on Chinese tire imports last Friday, citing 5,000 job losses in the U.S. tire industry over the past five years. Taking effect at the end of this month, these tariffs have been set at 35 percent in the first year, 30 percent in the second year and 25 percent in the third year - all beyond the existing 4 percent tariff on Chinese tires.
These tariffs represent the first-ever use of a transitional safeguard mechanism, approved by Congress in 2000 and designed to protect American industries in case Chinese imports present a "clear market disruption." United Steelworkers, the union representing the U.S. tire industry, originated the complaint earlier this spring, causing the International Trade Commission, a federal agency, to recommend tariffs. Former President George W. Bush rejected four similar recommendations during his term. Legally, Obama's action is sound. Strategically, it is a disaster.
Along with other world leaders in the G-20, Obama pledged earlier this year in London not to take protectionist measures amid the global recession. Next week the group meets again in Pittsburgh, and Obama will have to explain why he has reneged on his pledge.
Thanks to the "Buy American" provision in the stimulus package, the U.S. has already lost credibility on its commitment to free trade and global growth. We cannot pretend that we do not rely on global markets for our economic growth. For much of 2008 and the first half of 2009, net exports were the strongest contributor to GDP. If our credibility slips further and other countries enact retaliatory tariffs, the economic picture is set to look even bleaker.
This action jeopardizes our progress on several other fronts, including stabilizing a nuclear North Korea and regulating global financial markets. Additionally, the Democrats' motive to push the cap-and-trade bill is to have a system in place before this December's talks on climate change in Copenhagen. A key player that the U.S. is trying to commit to climate change is China. With the newfound ill will over the tire tariffs, the U.S. has compromised much of its high-ground bargaining position.
China's Ministry of Commerce has argued that the tariffs are unfounded since tire exports to the U.S. actually declined 16 percent from the first half of 2008 to the first half of 2009. Looking at a longer trend, U.S. imports of Chinese tires tripled from 2004 to 2008 so a 16-percent decline still leaves China in a greatly favorable position. However, the ministry's point remains that the U.S. tire industry's plant closings and job losses may be due primarily to a weak worldwide economy — not because of Chinese imports.
A further perception is that Obama is bowing to labor unions, especially United Steelworkers, in a political move to secure support for health care.
Obviously no one knows these things for sure, but the perceptions alone are enough to undermine the U.S.'s credibility and to jeopardize progress on several other fronts.
"Saving American jobs" is a catch phrase exploited by every politician and spewed as the utmost populist defense for any political action. To argue against it is to argue against America, to oppose all that is right, and to go against the grain of this country and its people.
But how far are we willing to go to save American jobs? Are we willing to undermine our credibility as a free-trading, capitalist nation? To provoke retaliatory tariffs and threaten our economic growth? To jeopardize our progress on denuclearization and climate change? To increase consumer costs for tires?
It seems an overly cumbersome way to save 5,000 jobs. And in the end, these 5,000 jobs may not even be recovered if producers move to other low-cost countries besides China. Futhermore, consider that there have been no documented human rights, environmental, product safety or price-dumping violations committed by Chinese tires. We have much larger battles to fight.
