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Obama tire tariffs didn’t work

By: | at 08:00 PM | Channel(s): International Trade  

President Barack Obama’s decision to slap duties on tires from China doesn’t appear to have reduced overall tire imports or saved U.S. jobs, the U.S.-China Business Council said.

“USCBC has found no evidence that the tariffs on low-end Chinese tires have had a positive effect on American jobs, and we suspect the tariffs have had a negative overall impact on American consumers,” the group’s president John Frisbie said in a letter asking Obama to order a U.S. government study on the economic effects of the tariffs.

“U.S. imports of the low-end tires involved in the case are up substantially, but have shifted from China to other suppliers,” the business group said in a separate policy brief examining the decision Obama made one year ago.

The council, whose current chair is Muhtar Kent, chief executive officer of Coca-Cola, represents both big and small U.S. companies with business interests in China.

Its membership includes Apple Inc, General Electric, Microsoft, Google, Caterpillar and Wal-Mart.

Obama slapped a 35-percent tariff on Chinese-made tires at the behest of the United Steelworkers union, which also represents workers at several U.S. tire plants.

A spokesman for the United Steelworkers union dismissed the USCBC’s report showing employment in the U.S. tire sector has fallen and tire prices paid by consumers have risen since the duties were imposed.

“The Chinese importers’ motives and their pitch would clearly be suspect by any common-sense standard,” said USW spokesman Gary Hubbard.

The U.S. Trade Representative’s office also said it believed Obama’s decision had a positive impact on U.S. tire production and employment.

“U.S. tire producers reportedly have increased production and are considering new investments. We also believe from reports that they have preserved jobs in the industry,” a USTR spokeswoman said.

Obama’s decision angered China, which accused Washington of violating World Trade Organization rules and breaking a commitment made by Group of 20 developed and developing country leaders not to impose new protectionist measures.

The United States has defended Obama’s decision as legal under an anti-import surge mechanism China agreed to let other countries use when it joined the WTO in 2001. The dispute is still in litigation at the WTO.

The duty, which went into effect on Sept. 26, 2009, declines to 30 percent in the second year and 25 percent in the third.

The U.S. China Business Council acknowledged in its report that imports of tires from China “are indeed down.”

However, overall imports of the low-end tires hit by the duties were up 21 percent in volume and 30 percent in value in the first half of 2010 as other suppliers stepped in to fill the gap, the council said.

“And we’re apparently paying more for them. Tire prices overall have risen 10 to 20 percent, according to

TireBusiness.com,” the council said.

Data from the U.S. Bureau of Labor Statistics shows U.S. tire manufacturing employment was 10 percent lower in the first five months of 2010, versus the same period in 2009 before the tariffs were applied, the council said.

“In short, the evidence available suggests what we would suspect: protectionist tariffs are usually bad policy for Americans,” the council said. (Reuters)