U.S.-China trade spat more about cars than tyres

September 15, 2009

Why are the U.S. and China trading blows about something as mundane as car tyres at a time when the world is trying to avoid slipping back into trade protectionism?
It’s not purely about the $1 billion worth of tyres China sells to the U.S. every year. It has more to do with the $100 billion of automotive vehicles, parts and engines America buys from abroad. China is worried about the direction of U.S policy. Beijing fears that the administration may find ways to thwart China’s future plans to ship vehicles to America.
China may not yet export cars to America, but it already exports a growing number of parts. Cars are in the pipeline. A recent spate of bids from Chinese companies such as Geely for failing U.S. and European auto brands have shown that it has the ambition to be the next Japan or Korea.
Auto sales are the only bright spot in U.S. consumer spending due to the Treasury-financed “cash for clunkers” program. Fears about stimulus dollars leaking abroad are one of the reasons the U.S. trade unions have been aggressively pushing for anti-dumping tariffs.
The worry is that the U.S. has imposed the tariffs under a law designed to protect domestic U.S. producers from being damaged by a sudden surge in imports from China. Determining whether this has occurred is a bureaucratic exercise in which experts determine whether such damage is occurring and propose remedies. But there is a political circuit breaker — the president has discretion in whether to implement remedies.
At least four similar, so-called Section 421 petitions were filed during the presidency of George W. Bush, according to the international trade commentator, Scott Lincicome, but none were approved. In this case, Obama came down on the side of the union. This has raised fears in Beijing that there will be more cases in coming months.
The Chinese side seems to fear that Obama is bending too much to domestic constituencies such as union and producer interests. Washington needs to be careful about this. Since it wants to export its way out of recession, it should not agitate China, which is potentially a major purchaser of U.S. exports.
China does not want the Obama presidency to set a precedent by discriminating against Chinese goods at this time. Moreover, it is concerned that other countries might follow suit and start to target Chinese goods as well. Its reliance on exports is potentially the big weak link among China’s recovery.
That’s why Beijing, which has limited its protest mostly to words in recent years for fear of more retaliation, quickly spun into action this time. China’s counterpunch is equally forceful. It is launching an anti-dumping investigation into imports of U.S. chicken products and vehicles.
The idea is presumably to raise the political cost for Obama of taking his pen out of his pocket every time a Section 421 case, which specifically targets China, is presented for his signature.
During the first half of this year, 89 percent of China’s chicken imports came from America, representing a fifth of all U.S. chicken exports. In comparison, tyres account for just 0.4 percent of the value of goods what China sells to America each year and 0.07 percent of China’s total exports.
While it is no secret that America subsidises its agriculture industry, China also spares no effort in helping exporters and putting up import barriers to protect domestic manufacturers. For example, China agreed in August to stop some discriminatory charges it imposed on imported U.S. auto parts after a World Trade Organization ruling from September 1.
After chicken, U.S. soybeans might be the next target. As much as 40 percent of China’s soybean imports came from America last year. And this year, China’s soybean imports increased by 28 percent.
The last time China took retaliatory measures was during the “garlic trade war” against Japan and South Korea in 2000-2001.
Washington and Beijing have vowed to cooperate in seeking to revive global economic growth, but the dispute over tyres has laid bare the two countries’ continued friction over trade. This could spill into the G20 summit later this month and Obama’s scheduled visit to China in November.
In previous meetings between the top leaders of the two countries, mostly the U.S. lectured and China listened. Now Beijing is more outspoken about expressing its own concerns and many at home are calling for more tit-for-tat policies.
It remains to be seen how the U.S. will react to a more assertive China.


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‘trade protectionism?’= survival of the fittest.

Tires, Tyres, Chickens, Soya Beans, Garlic: Maybe time for a ‘Chicken, Soya Bean and Garlic Parity Burger’ that tastes like tyres ?

Posted by Casper | Report as abusive

Chinese cars are sold in Turkey, and they are a real headache for the local manufacturers. Everybody knows they are cheap but no body knows if they are safe. America must think twice before letting chinese cars in.

Posted by Aytek Savaş | Report as abusive

Turkey is a muslim country that’s why it can’t innovate or make cars

Posted by jOn | Report as abusive

Having on August 12th, 2009 provided the mathematical formula to the United States Government with a request for ‘normal economic support’ as a legally homeless person living in my 2000 Ford Focus SE Wagon after Six (6) Years of civil dispute regarding my 2004 origination of the YOU TUBE business model and the subsequent retaliation against my person, I did have a ‘devine revelation through a tire’.

In arriving to my duties as a low-wage part time hourly worker at the Glen Lake Boat Launch where I wash boat bottoms, I ran over a FILE inadvertantly left on the Department of National Resources run property, penatrating my right-rear passenger side tire. I believe the tire is from CHINA and was purchased in a set of four, balanced and mounted for $400.00 and after only 20,000 miles of service, these ‘shitty-tires’ are worn. I need new tires but can not afford American Tires because I have been restricted from my professional employment by retaliation for a Civil Complaint against an employer engaged in FRAUD.

This Six (6) Year blacklisting has now reduced me from married american family man, successful business man, to homeless derelict with Chinese tires.

The United States Department of Justice, has assured me (for the last THREE YEARS) that the matter would be corrected to my saticefaction, would someone please tell that to my CHINESE TIRES with a FILE THROUGH THEM.

My car has been towed, thankfully paid for by GEICO as I am IMPOVERISHED and have no money for Food, Housing, CHILD SUPPORT or normal human existance because of non-prosecution of White-Collar FRAUD CRIMES in NEW YORK CITY.

Because I am broke and must have transportation to my below-poverty-level-job, I must buy Chinese Tires.

Maybe President Obama, should provide me a PAYCHECK so I can buy some new High-Quality Tires.

My car is at the service station in LELAND MICHIGAN and I have no money to pay for REPAIR of the CHEAP TIRES.

Quite frankly, President George W. Bush exhibited a very narrow understanding of international trade, particularly when it came to China. The Chinese government has manipulated its currency to the detriment of America. That has allowed it to sell cheaply made goods to Americans who, unfortunately, have little choice but to purchase them because of falling salaries due in large part to poor trade policies that do not protect American workers.

It’s refreshing to have a president who appears to be inclined to protect America and American workers. That’s more than can be said for the previous administration which, in many ways, hurt our country. Maybe now we’ll see a rise in American manufacuring and industry, despite Republican efforts to send it all overseas.

Posted by Mike H. | Report as abusive

The ‘spat’ is more about food than anything else. To get your hands on it, you have to export junk and clunk to the rest of the World, very fast, because you find yourself in desertification, together with 1.5 billion very hungry people.

Posted by Casper | Report as abusive

Even though he sounds like another lightweight blogger working for the Obama camp, I still agree with Mike H.

And yes, the Bush government stood by and did nothing as this tide of cheap goods (crap) swamped our shores. In all deference Bush was occupied with other matters. The tire tiff is a good start and its about time something was done. Maybe too little, too late. I go to Walmart often here in Canada, I looked desperately for something Canadian made. I found only two things in the whole store: tape and hockey sticks.

The wholesale devaluing of the Chinese currency is considered a massive fraud and nobody really knows what to do with this.

Posted by Drew | Report as abusive

The statistics in this article about US export of chickens and china export of tyres are not even comparable. The person who wrote this article is an idiot…

Posted by Bad Statistics | Report as abusive

China should hit back with stealth tarrifs and import substitution

Posted by feigel | Report as abusive

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