Tire Imports

A Firm Stand, Not A Cave-In

Isaiah J. Poole — Wed, 23 Sep 2009 11:11:21 -0400

It's always amazing to see the bald-faced capacity of the right to spew the intellectual fatuousness that whenever a president's decision aligns with the interests of unions and workers, he's caving in to political pressure, but when it aligns with the interests of corporations, it's always enlightened policy-making.

George Will travels that road again today in a column in The Washington Post denouncing President Obama's decision to impose a tariff on the Chinese tire industry. He argues that by responding to an International Trade Commission finding that China was violating World Trade Organization agreements, Obama was not only contradicting his free-trade campaign promises but that, get this, more poor people would die in car accidents because they would not be able to replace their worn tires with cheap Chinese imports.

Fortunately, a number of factually well-armed people have already weighed in though the comments section of that column; unlike most newspaper comment threads, the one following Will's column contains some important gems. Several commenters noted that Chinese tires have a marketplace advantage mainly because of industrial subsidies from the Chinese government and currency manipulation. This is not, as Will would have readers believe, a consequence of consumer choice in an equal playing field. China engages in forceful, unapologetic protectionism. The ITC, looking at the facts, recommended an even higher tariff than the 35 percent in the first year that President Obama has proposed. Will, a Second Amendment freak, wants the U.S. to come to this particular fight unarmed.

The kind of arguments columnists like Will made today, and the similar arguments by economists who should know better, are precisely why economist Jeff Madrick, at a news conference yesterday sponsored by the Institute for America's Future, said he was "discouraged by the economics profession." The China tire decision has evoked the specter of the trade war sparked by the Depression-era Smoot-Hawley Act, when in fact, Madrick said, "we're not anywhere close to that kind of episode."

Ohio Sen. Sherrod Brown, who was at the same news conference, laid out the "indisputable facts" about China's three-fold ramp-up of low-cost tire production in a four-year period and the 5,000 American jobs that were lost as a result. More importantly, he pointed out that when countries agree to a set of rules, there has to be consequences when those rules are violated—not just on principle but for the proper functioning of international commerce.

"President Obama's decision is an example of responsible trade," Brown said. "When you don't enforce the rules, markets can't find equilibrium."

Brown's message to Obama and world leaders converging at the G-20 summit at Pittsburgh is to "not confuse legitimate government actions with protectionism." There is a debate that must happen at the G-20, as Robert Borosage points out today, about how the leading economic powers should work together to produce more jobs in their countries. And it is in fact about time for the United States to look out for the interests of labor, for the prosperity of workers able to get solid jobs in a revitalized manufacturing sector is central to getting the nation's economy back on track.

Tire Tariff Aids Manufacturing

OurFuture.org Staff — Fri, 18 Sep 2009 12:59:55 -0400

Finally, a President with the Guts to Enforce Trade Laws

Leo Gerard — Mon, 14 Sep 2009 11:49:32 -0400

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.

Why Auto Parts?

Marcy Wheeler — Mon, 14 Sep 2009 09:18:45 -0400

China has announced that it will retaliate for Obama's decision to impose sanctions on Chinese tires by considering sanctions against US imports into China of chicken and auto parts.

The initial reaction from China, the U.S.’s second-largest trading partner after Canada, indicates an exchange of trade penalties may follow. China’s exports to the U.S. were $252 billion last year, compared with $81.4 billion of imports, according to Chinese government figures.

The U.S. shipped $2.9 billion of automobiles and auto products to China last year. The Asian nation imported $957 million of poultry from nations including the U.S. in 2007, government figures also show.

Chinese industries complain that they’re being hurt by “unfair” U.S. trade practices, the nation’s Ministry of Commerce said on its Web site yesterday. The Beijing-based ministry is probing complaints about U.S. subsidies for auto and chicken products, a spokesman said today. The agency is also probing the alleged dumping of the chicken products, he said.

I assume China is targeting chicken because our Ag is subsidized and the meat industry has a lot of clout in this country.

I'm more fascinated by China's decision to go after auto parts (and note, some of the announcements on this say "automotive products," which might include cars themselves).

In truth, China imposes huge tariffs on cars coming into its country (and ties permission to import cars to sourcing in China--for example, GM might get to import a certain number of Cadillacs in exchange for sourcing another part of its Chinese-production in China). And the import of parts is often limited to more complex parts that are the same in China as they are in the US. There's not much there there.

As the NYT notes, going after parts doesn't seem to make sense and may backfire.

But spotlighting automotive trade may be risky for China. G.M. and Ford both rely mostly on local production to supply the Chinese market, while China is rapidly increasing auto parts shipments to the United States.

Except.

Except that the US Government owns a majority stake in GM, and GM will not succeed in turning around without continued growth in the Chinese market.

Now I don't know whether China believes it can claim US support for GM over the last year constitutes a subsidy, or whether it just wants to send a message that it will make it more difficult for GM's partnerships in China to succeed. But it happens to have targeted the industry in which the US Government has the most invested.

Myths of Protectionism: Stories You Are Likely to Hear in the Wake of the China Tire Trade Tariff Case

Dave Johnson — Mon, 14 Sep 2009 06:00:00 -0400

President Obama has decided to enforce our trade laws and imposed a 3-year tariff on Chinese tires. I suspect the country is about to witness a corporate hissy fit that will surely rival any righteous teabagger’s demands to see the President’s birth certificate.

Here is what is going on: when the US endorsed China entering the World Trade Organization the agreement was that if any of our industries were significantly disrupted, we could call “time out” and give those industries 3 years to adjust. In case after case President Bush refused to enforce this agreement as China took over one industry after another. Since we then had to buy what we used to make, our balance of trade deteriorated and we now owe China vast sums.

In this case the U.S. International Trade Commission found that America’s tire industry was, to say the least, disrupted by a surge of imports of cheap tires. As with so many industries, cheap Chinese imports quickly dominated the market, American factories closed, American workers were laid off, American communities were devastated and instead of having to pay wages and maintain factories, American CEOs and Wall Street executives pocketed more and more short-term profits at the long-term expense of their own companies and our country's economy.

So this time President Obama is enforcing the agreement and applying tariffs. In fact he is applying a lower tariff than the 55% that was recommended, but the tariff of 35% is still substantial and may save jobs, preserve some manufacturing capacity, and hold the trade deficit down just a bit.

The corporate hissy fit is beginning right on schedule. The word being shouted loudest is “protectionism” and there are threats that this will lead to a trade war.

The headline at the Drudge Report screams: “CLASH OF THE TIRES LEADS TO TRADE WAR,” linking to a Financial Times story that doesn’t actually say anything about a “trade war.” In the story China’s minister of commerce Chen Deming says, “This is a grave act of trade protectionism,” and Eswar Prasad, professor of trade economics at Cornell University, calls the enforcement of the agreement “protectionist measures” while at the same time saying the tariffs are not “substantive restraints on trade.”

The Washington Post, rather than lead with the pro-American viewpoint, chose to lead with China's, “China blasts US tire duties as protectionist blow.” Many other corporate-dominated media outlets followed in a similar vein, arguing how this is a bad decision. Wall Street Journal, “A Protectionist Wave” and "Tariff on Tires to Cost Consumers". Others, like Business Week, just reported the news: “In China Tires Case, Obama Strikes Middle Ground.” (Forbes, to its credit, led with a neutral pun, “China and US: Tire-d of Fighting.”)

So what is “protectionism” and why is it supposed to be wrong for a government to protect a country’s manufacturing interests? Isn’t America borrowing so much money from other countries because we don’t manufacture enough goods here anymore to sell and thereby pay for the things we buy?

In the past a major portion of America’s tax revenue came from collecting tariffs on imported goods. This helped fund development of our competitive infrastructure while maintaining internal markets that encouraged development of industry to make goods here both for use in the country and for export. This led to manufacturing jobs. Every country that has built up a manufacturing base has done so by restricting competitive imports.

But there were problems with this “mercantalistic” approach. As with all rules they can be manipulated by the currently-powerful. This was done to keep some prices unreasonably high, encourage monopolistic practices, reduce access to localized or regionalized specialties and discourage others from importing our domestically-made goods. So after we built up a manufacturing base the time came to start selling to others. This necessitated back-scratch trade agreements: you scratch my back by lowering your tariffs, we’ll scratch yours by lowering ours. Etc. And each country's markets expand - as does the competition.

Unfair competition led to the idea of protecting our standard of living. Unfair labor costs, kept low by use of child or prison labor, exploitive wages in non-democratic countries, even use of forced labor or slaves undercuts our own companies’ ability to compete. Failing to provide worker safety protections, or allowing pollution also provide trade advantages to offshore competitors. So to protect ourselves we imposed tariffs that raised the store price on those goods to prevent them from undermining our own standard of living and safety and pollution standards. We protected our national interest.

The idea of these "protection" policies is to encourage these competitors to pay better wages, improve worker safety and/or stop polluting. This way their own economy and environment could improve and their workers would be able to buy the things that we make. Used this way, the policy of protectionism improves living standards for workers everywhere, while growing our economy and improving our standard of living in the process.

The idea of “free trade” theorizes that without “government” involvement these disadvantages will disappear and prices will eventually reflect supply and demand instead of tariffs and regulations. Of course, this ignores that government as constituted in democracies is a banding together of the citizens for mutual protection, empowerment and benefit. The result of "free trade' is a downward spiral of wages, benefits, worker protection and environmental standards as countries race to the bottom in competition.

Expansion of trade is beneficial to all parties if done fairly. Of course, “fairly” is a difficult state to attain when powerful interests compete for dominance in rule-making. In this case we have the competing interests of American workers and manufacturers pitted against Chinese manufacturers. There are also the powerful interests of distributors and retailers who make a percentage off a sale, whatever the source of the goods, and Wall Streeters who buy up companies and demand short-term profits, and profit from debt.

This is where the opposition comes from. Certain powerful interests are doing just fine without any of this goody-goody do-gooder stuff, thank you, and they want things kept that way. So they will fight against changed in the status quo, no matter how necessary or beneficial to the rest of us. We see this so clearly in the health care reform fight and soon we will be hearing some outrageous lie on the order of "death panels" and "government takeover" to try to scare people away from fighting for their own jobs, wages and benefits by asking for reasonable trade and manufacturing policies.

Their primary scare word in use today is "protectionism."

Part II will examine some of the specific myths surrounding the mystical and powerful word “protectionism.”

President Obama Enforces Trade Law In China Tire Case!

Dave Johnson — Sat, 12 Sep 2009 01:10:09 -0400

President Obama signaled a new direction in America's trade policies by deciding to enforce the ITC's recommendation to impose tariffs on Chinese tire imports.

NY Times: U.S. Adds Punitive Tariffs on Chinese Tires

In a break with the trade policies of his predecessor, President Obama announced on Friday night that he would impose a 35 percent tariff on automobile and light-truck tires imported from China.

. . . The decision signals the first time that the United States has invoked a special safeguard provision that was part of its agreement to support China’s entry into the World Trade Organization in 2001.

Under that safeguard provision, American companies or workers harmed by imports from China can ask the government for protection simply by demonstrating that American producers have suffered a “market disruption” or a “surge” in imports from China.

Wash. Post: U.S. to Impose Tariff on Tires From China,

In one of his first major decisions on trade policy, President Obama opted Friday to impose a tariff on tires from China, a move that fulfills his campaign promise to "crack down" on imports that unfairly undermine American workers but risks angering the nation's second-largest trading partner.

. . . The tire tariff will amount to 35 percent the first year, 30 percent the second and 25 percent the third.

Although a federal trade panel had recommended higher levies -- of 55, 45 and 35 percent, respectively -- the decision is considered a victory for the United Steelworkers union, which filed the trade complaint.

"The president sent the message that we expect others to live by the rules, just as we do," Leo W. Gerard, president of the union, said Friday night.

Meanwhile Fox news leads their story with the Chinese viewpoint rather than the American, China Slams U.S. Tariffs on Tires as 'Serious Act of Trade Protectionism',

The new tariffs set a bad precedent in light of the global economic crisis and China reserves the right to react, Ministry of Commerce spokesman Yao Jian said according to a statement on the ministry Web site. (emphasis in original)

Obama Shows Encouraging Signs on China, But Is It A Smokescreen?

Mike Elk — Fri, 11 Sep 2009 15:02:54 -0400

In recent days, the Administration has made encouraging signs that it plans to enforce U.S. trade law, but is it smoke screen for advancing a free trade agenda?.

Today, it came that Senator Harry Reid and the Office of U.S. Trade Representative are in support of putting safeguards on illegal, surging Chinese tire imports.

In a letter to the President on September 2, Harry Reid said:

In order to help move U.S. trade policy forward, we must restore the confidence in our farmers, workers and domestic producers that when they work hard and play by the rules, their government will move aggressively to enforce U.S rights under trade agreements, to implement our trade remedy laws, and to fight for their interests.

The recommendation by Senate leadership and the United States Trade Representative seems to indicate that President Obama is going to follow through on his campaign promise to enforce U.S. trade laws. It also comes on the heels of encouraging news yesterday that United States Department of Commerce has decided to place tariffs on illegal pipe imports from China.

However the devil remains in the details.

On a press call this week, Steelworkers President Leo Gerard was critical of a compromise tariff remedy being floated by some. U.S. tire importers have suggested a tariff of 7 to 15 percent, which Gerard characterized as being ineffective. The International Trade Commission determined that the proper remedy is a 55 percent tariff that would decrease by 10 percent annually and expire after three years, which is what the Steelworkers are advocating.

Additionally, some remain skeptical if Obama intends to enforce U.S. trade law in these instances in order to gain support for upcoming trade deals with Columbia and Panama.

Columbia has a notorious record of killing trade unionists. Since 1991, over 2,200 trade unionists have been assassinated in Columbia by corporate run gangs. Panama is considered the second biggest tax haven in the world behind Hong Kong.

As a result, both deals have been unable to get through Congress, so far. However, some feel if the Administration shows its support for fair trade in these instances involving China, that it will curry favor with members of Congress that have concerns about both of these trade deals. Even Senator Reid in his letter said that enforcing U.S. trade in the China tire case is vital for winning support for future trade deals.

While the Administration is making some initially encouraging signs on trade, only over time will we know whether the Administration truly intends to pursue a policy of fair trade that leads to prosperity in all nations. Until then we must remain vigilant that they remain true to their commitment to workers right and trade that works for everybody not just Wall Street and fat cat CEO's.

China Tire Case - Financial Times Op-Ed Says Tariffs Needed! Update - Reid Says Tariffs Needed

Dave Johnson — Fri, 11 Sep 2009 11:59:13 -0400

Clyde Prestowitz op-ed in the Financial Times, Obama can help free trade with tariffs:

Not to accept the tariff recommendation would be a severe blow to open trade and globalisation as well as to America’s future economic health.

Prestowitz argues a tariff would be the appropriate response to Chinese protectionism and mercantilist behavior,

... China, ... far from embracing orthodox free trade has openly adopted a neo-mercantilist, export-led economic growth strategy. China keeps its renminbi undervalued against the dollar in order indirectly to subsidise its exports. Foreign direct investment in China is often induced by the use of special, targeted tax and financial incentives. Foreign companies investing in China are often required to export the bulk of their production as a condition of being allowed to enter the Chinese market. ... It is Chinese industrial policies and not market forces that are currently determining the trade flows and the location of production and jobs to the detriment of the US tyre industry.

He points out that this Chinese protectionism and mercantilist behavior is exactly what Section 421 was written to prevent,

This kind of situation was anticipated when China negotiated its entry into the World Trade Organisation ... These deals specifically called for tariffs on China’s exports if they surged in ways that disrupted US industries. Between 2004 and 2008, US imports of Chinese tyres rose 215 per cent while US production fell by nearly 27 per cent and 5,000 US tyre industry jobs were lost. The ITC says China is not engaging in standard free trade and that its actions meet the established criteria and justify imposition of tariffs under the agreed international rules.

Prestowitz concludes by saying that imposing tariffs will help restore honest, fair and truly free trade.

Update - In a behind-the-firewall story in World Trade Online titled Reid, "USTR See Tire Relief As Essential For Support Of Future Trade Deals", Senate Majority Leader Reid says the tariffs are needed to ensure future Congressional support of trade deals. From the story,

Senate Majority Leader Harry Reid (D-NV) and officials from the Office of the U.S. Trade Representative have signaled that they see the imposition of an effective safeguard on Chinese tire imports as a necessary step to ensure support in Congress for future trade deals.

[. . .] He pointed out that the Bush administration had a "perfect record" of refusal to provide relief under Section 421 petitions.

"This refusal was an important factor undermining confidence among the public and many in Congress in U.S. trade policy," Reid said. "In order to help move U.S. trade policy forward, we must restore the confidence in our farmers, workers and domestic producers that when they work hard and play by the rules, their government will move aggressively to enforce U.S rights under trade agreements, to implement our trade remedy laws, and to fight for their interests."

"China Tire Case": Obama Trade Policy Decision Nears

Dave Johnson — Wed, 09 Sep 2009 13:04:02 -0400

President Obama faces a tough decision soon that will signal how his administration will tackle the problem of balancing our trade policies. This is the upcoming "Section 421 Tire Case" decision. Summary: American has been importing more and more tires from China while closing tire plants here. The surge in imports violates an agreement known as "Section 421" that we made with China when they entered the World Trade Organization. The US International Trade Commission has ruled that China is violating Section 421 and recommended tariffs on tire imports. Obama has until September 17 to choose to implement this remedy, ignore it or do something in between. (Click through to a post with a number of links to background information on this decisions.)

When these trade issues came up in the past President Bush always decided against American manufacturers, allowing China and others to capture one industry after another, forcing more and more American factories to close and building up the huge trade deficit that forces us to borrow ... from China. The resulting trade deficit meant that we had to borrow more and more money to buy things that we used to just make for ourselves.

And this meant fewer and fewer well-paying jobs for our citizens. This also meant that the American consumer, the “engine” of the world economy, finally ran out of shopping power. The economic collapse shows that trade policies that make the American people poorer just make everyone else poorer, too.

So this case is part of a bigger picture. The real issue goes beyond trade. The real issue is getting America's economy back in balance for the long term with real jobs that are not dependent on financial or housing or stock market bubbles. The issue is the larger economic paradigm, not the resulting slowdown. To get there America needs a real industrial policy that takes a national view of the importance of manufacturing and supports it through: investment, education, R&D, etc. as well as trade policy.

One trade ruling doesn't do that, but it will signal whether President Obama is ready to take on a tough fight and tackle this problem. The appointment of Ron Bloom as Senior Counselor for Manufacturing Policy is a solid beginning in the right direction. According to the White House Bloom will assist with “the President’s agenda to revitalize the manufacturing sector.” Just having an agenda to revitalize the manufacturing sector is an important and and promising step!

Of course, at the same time, this is a tough challenge. Obama's predecessor dug the country into a deep hole. Thanks to the "free trade" policies that got us where we are today, China is our banker and it is very difficult to go against your banker's wishes. However, our trade partners would do well to recognize that the American consumer is the engine of economic growth, and well-paying jobs are the engine of that consumption. Trade policies based on raising living standards on both sides of the border solves this problem.

Bob Borosage writes today, in Obama's Next Speech: Telling Our Banker We Want Out of Debt,

Next week, the president will address the convention of the labor federation, the AFLCIO ... That same week, he must decide what to do about the ruling of the International Trade Commission recommending that he slap tariffs of up to 55% on rubber tires being dumped in the U.S. market by the Chinese.

[. . .] We can't recover the old economy -- and shouldn't want to. … We were shipping jobs, not goods abroad, losing three million manufacturing jobs under Bush before the crash while the economy was growing. Not surprisingly, wages stagnated, family incomes lost ground, debts soared. And that was in the good times.

[. . .] [China] lends us the money to buy the goods that American companies make with jobs and technology they sent there. It does so because it pursues what has been a remarkably successful mercantilist policy designed to make it the dominant global center of manufacturing, a 21st century version of what the U.S. did in the late 1800s and early part of the 20th century.

. . . China has to be weaned of its export addiction, just as America has to revive its ability to make things in America. This is best done cooperatively, with a grand bargain revaluing the Chinese currency, while both nations join others in creating a more balanced global economy. But at the end of the day, it won't happen unless the U.S. is ready to stand up and act to protect its interests.

Some predict Obama will take the middle ground. From The Hill today,

“The deadline for his decision comes on the eve of the G-20 heads-of-state meeting in the Steel City on Sept. 24-25. G-20 leaders have pledged to avoid protectionism, and just last week Treasury Secretary Timothy Geithner joined other finance ministers in the group to reaffirm the U.S. commitment to fight all forms of protectionism.

[. . .] The best option for Obama might be to find middle ground. He can go along with the ITC’s recommendation, and he may also reject it completely. He can also impose tariffs somewhat smaller that those proposed by the commission, which might make both sides unhappy but allow the president to say he has found a middle ground.”

From U.S. Steel Pushes Obama to Choose Workers Over Trade,

“The one thing that is on the line here is the president’s credibility,” said Scott Paul, executive director of the Alliance for American Manufacturing, a coalition of steel companies such as Pittsburgh, Pennsylvania-based U.S. Steel and the steelworkers union. “If they want to pursue an activist trade agenda, they need to pursue an active enforcement agenda, and this is the first thing on their plate.”

On April 14, 2008, candidate Obama spoke to the United Steelworkers in Pittsburgh, a week before the contested Democratic primary in Pennsylvania.

“I have consistently supported in the Senate going after China,” Obama said then, after embracing union President Leo Gerard. “Here’s the thing that people don’t understand: China needs our market. Their economy is dependent on exports to the United States. We have bargaining power.”

Keep an eye on this. It is not just about tire imports, it will signal the direction that the Obama administration will take.

What Obama's Next Big Speech Should Be

Robert Borosage — Wed, 09 Sep 2009 11:56:08 -0400

At a delightful dinner party the other night, our host, a cosmopolitan man with interests ranging from water in California to Sufism in India, punctuated a brief complaint about the economy by noting, "And of course, I'm a nut on trade" (meaning an ardent advocate of our corporate "free trade" policies).

You aren't the only one, I thought, and you've got to be a nut to be able to defend that position—but I bit my tongue, choosing the pleasures of a soft evening over the delights of a sharp argument.

Over the next few weeks, however, President Obama has little choice but to descend into that argument. Just as in his health care speech tonight, he must address a fundamental threat to our security that can no longer be ignored, which challenges powerful and entrenched interests—and that is coming to a head over the course of this month.

Next week, the president will address the convention of the labor federation, the AFL-CIO, as delegates convene to elect new leadership. That same week, he must decide what to do about the ruling of the International Trade Commission recommending that he slap tariffs of up to 55 percent on rubber tires being dumped in the U.S. market by the Chinese. The week after that, the heads of the leading economic nations in the world—the G-20—with gather in Pittsburgh to discuss next steps in reviving the global economy.

Given the health care battle, the president may well decide to muffle the core issues in the soporific diplomatic quilting of shared principles and professed intentions. (Also on his plate is the stark question of whether to dispatch more U.S. men and women to a distant place called Afghanistan.)

But this can't be put off for long. The reason is simple, although not accepted by the self-professed nuts on corporate trade. We can't recover the old economy—and shouldn't want to. In that economy, the U.S. served as the world's consumer. America ran up deficits as high as 6 percent of GDP, borrowing some $2 billion a day from abroad. Global growth—particularly in mercantilist export nations like China and Germany— relied on Americans spending more than they earned, running up debts purchasing goods made abroad, often by branches of U.S. multinationals. We were shipping jobs, not goods, abroad, losing three million manufacturing jobs under Bush before the crash while the economy was growing. Not surprisingly, wages stagnated, family incomes lost ground, debts soared. And that was in the good times.

In his "Sermon on the Mount" economic speech, Obama summoned America to build a new economy, not on the quicksand of speculation and debt, but on the rock of investment and production. He laid out core elements of a new strategy—investment in education and training to create the best educated workers in the world, investment in research and development to stoke new markets, building a 21st-century infrastructure—from a new electric grid to fast trains and modern broadband—and getting health care costs under control.

But central to this new economy must be a more balanced global economy, one where the U.S. makes and sells more and consumes less, and mercantilist nations such as China and Germany consume more at home and export less abroad.

That sounds simple but it requires wrenching changes. A first order for the U.S., and one reason Obama has made new energy a centerpiece of his agenda, is to reduce our dependence on foreign oil, the import of which spiked at over half of our trade deficits, sending billions abroad to the corrupt emirates that aren't exactly a hotbed of enlightenment.

Second, we'll have to change our relationship with our largest creditor, China. Our deficit with China has peaked at an astounding 83% of our non-oil-goods trade deficit.

China lends us the money to buy the goods that American companies make with jobs and technology they sent there. It does so because it pursues what has been a remarkably successful mercantilist policy designed to make it the dominant global center of manufacturing, a 21st-century version of what the U.S. did in the late 1800s and early part of the 20th century.

Obama's commitment to new energy as a centerpiece of the new economy illustrates the question. It isn't sufficient to wean ourselves from dependence on foreign oil if, as Steelworkers President Leo Gerard notes, we become dependent on imported solar cells and windmills. But China has designated wind and solar as strategic industries that it intends to dominate. We need a clear industrial and trade strategy of our own.

That's why the decision on rubber tires is so important. The nonpartisan commissioners of the International Trade Commission have recommended the president slap tariffs on Chinese tires now being dumped on the market. The case arises under the laws that the Chinese agreed to as a condition of joining the World Trade Organization and gaining most favored nation status. Needless to say, the Chinese are not subtle in expressing their opposition to the tariffs, and suggesting that any such action would damage our relations. This is our banker talking. Bush faced similar choices several times and folded.

But the tire industry simply exemplifies the broader challenge that can't be ducked. The Chinese are intent on capturing this industry. They encourage U.S. tire makers to open factories in China, offering cheap labor and lax environmental standards and an underpriced dollar. They aren't subtle. One manufacturer was allowed to open a factory on the condition that the entire production be exported.

China has to be weaned of its export addiction, just as America has to revive its ability to make things in America. This is best done cooperatively, with a grand bargain revaluing the Chinese currency, while both nations join others in creating a more balanced global economy. But at the end of the day, it won't happen unless the U.S. is ready to stand up and act to protect its interests. Obama has already told the G-20 that the U.S. could not return to being the world's consumer of last resort. But in the midst of the global financial meltdown, the administration has chosen to postpone calling China on its currency manipulation. Eventually, however, words must be turned into action.

One last note: Change like this, however imperative, is hard and forbidding. Big interests with powerful and rich lobbies are challenged. Conservative shibboleths have to be shattered. Politicians in both parties have no stomach for it. It is a hell of a lot easier to go along and get along. This country doesn't have that luxury anymore. On the economy, health care, energy, public investment, progressive taxation, global economic strategy, this president has inherited not simply the failures of the Bush years, but the catastrophic consequences of the conservative Age of Reagan—30 years in which the U.S. squandered its assets while failing to make investments vital to its future. Remember that when people say Obama is taking on too much. He has little choice if he is to be the transformative president that we need to get us out of the hole we are in.