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

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.\”