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Major trade test ahead for Obama with China tire ban

By Ding Qingfen and Li Xing (China Daily)
Updated: 2009-09-08 07:58

The proposal by a United States workers union to ban Chinese-made tires has US President Barack Obama bouncing between two very precarious positions.

The high-level tariffs, which would effectively impose a ban, will keep Chinese tire imports off US roads, strip 100,000 local laborers of their jobs and potentially spark a series of special taxes by other nations and regions.

On the one hand, Obama threatens to sour China-US relations, which the US values in this current economic crisis, by approving the tariffs. The decision, expected before Sept 17, represents Obama's first major test of the White House's trade agenda with an economically recovering China.

But on the other hand, Obama is wary of enraging the unions who support the case and blame Chinese tire imports for the loss of many US jobs.

The unions are an active and important political factor for the first-year president, having reportedly donated approximately $400 million to his election campaign.

"He has to balance benefits of both and make both happy," said Wang Rongjun, a professor at the Institute of American Studies of the Chinese Academy of Social Sciences.

"It's a game of wisdom. The decision is symbolic."

The proposed tariffs arose out of a petition brought by the United Steelworkers Union, which represents half of American tire makers. The International Trade Commission in April announced that tire imports from China had disrupted the US industry and proposed a three-year program of import relief, with a 55-percent-tariff on Chinese-made tires in the first year, 45 percent in the second and 35 percent in the third. Last Thursday, the US Trade Representative sent the recommendations to Obama.

Related readings:  Delegation heads to US for tire trade barrier lobby  US tire imports ruling fails to tally with facts: ministry  US tire duties protectionist, say experts  China regrets US rule on tire imports

Experts have called the proposal "unreasonable and unfair" and said that Chinese tire manufactures "largely do not compete against their American counterparts in the US.

Chinese tires have been "targeting the budget and no-brand replacement tire market for US consumers with severe budget constraints," a sector that the US tire makers gave up long ago and are unwilling to enter again, said China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters in a letter to President Obama.

Chinese tire exports have not had rapid growth in recent years. In 2008, Chinese tire imports into the US only increased by 2.7 percent from the previous year. And, during the first quarter, Chinese imports significantly dropped.

And the proposed plan, if implemented, will deeply hurt American consumers and the auto industry, the chamber added.

Many US organizations, including the Tire Industry Association, Emergency Committee for American Trade, three big automakers and tire manufacturers, have urged Obama not to impose the ban.

What matters most is that the tariffs will cast a shadow over China-US relations after both sides repeatedly vowed to make things better.

China's GDP grew by 6.1 and 7.9 percent during the first and second quarter. While the US unemployment rate remains high and has been climbing since last April, the US expects to gain from China's high economic growth.

"Chinese economy has rebounded significantly without having to rely so much on exports. We see the future of the Chinese economy focus more on domestic consumption as Chinese leaders have advocated," Gary Locke, commerce secretary of the US Department of Commerce, told China Daily in Washington.

"There are many opportunities for Chinese to invest in the US, and we also see many opportunities for American goods and services to go to China," Locke said.

But the Chinese government will not turn away from issues that will harm the interests of Chinese industries. Officials from the Bureau of Fair Trade for Imports & Exports with the Ministry of Commerce said China has prepared an assortment of plans for countering different possible results from the Obama administration.

"We will surely protect local tire manufacturers from being hurt when needed," they said.

China will likely take retaliatory measures against the US industries. The Tire Industry Association has petitioned China to launch restrictive measures.

Moreover, experts suggested the Chinese government clamp down on US auto imports. During the first half, China imported more than $1 billion worth of automobiles from the US, up by 9.1 percent year-on-year.

"It's unfair for Chinese laborers, after we made the American automakers happy, if the US launches sanctions against Chinese tire imports," said He Weiwen, a council member of the China Society for American Economy Studies.

But the Steelworkers Union said they are confident Obama will rule in their favor as he has promised to turn tough on China trade during last year's campaign.

"Obama cannot easily say no to the unions, but he will have to justify the decision," said Wang.