It’s been a couple of weeks since President Obama agreed to enforce U.S. trade laws in a case involving tire imports from China—and you’d think by the reaction in some anti-worker quarters he was creating the equivalent of death panels.
In 2008 alone, China’s tire makers sold more than 46 million low-cost tires to this country for stores like Wal-Mart. More than 5,100 domestic consumer tire production jobs were lost between 2004 and 2008 by the flood of Chinese tire imports that undersold producers in the United States. Domestic tire companies have announced they will close more plants and eliminate another 3,000 jobs by the end of this year. (Check out a fact sheet on the tire decision here.)
In July, the U.S. International Trade Commission (USITC) ruled in favor of a United Steelworkers’ (USW‘s) petition filed under Section 421 of the Trade Act of 1974 as amended. The USITC found that tariff relief was needed to urgently reduce those tire imports. The USW, which represents most U.S. tire workers, demanded the Obama administration act forcefully to counter this import surge. And on Sept. 11, the Obama administration agreed to provide tariff relief by increasing the duty on tires from China for three years.
USW President Leo Gerard said in doing so, Obama "showed grit."
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.
Obama’s decision isn’t going over well with vested interests. Those like Ohio-based Cooper Tires, which, in testimony to the USITC, reported that all of the tires it makes at its Chinese plant, under its licensing agreement with China, must be exported until May 2012. As Gerard aptly describes companies like Cooper Tires:
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.
Others, of course, see Obama’s ruling and incorrectly scream "protectionism."
First, before we knock over the protectionist boogeyman, let’s take a second to look at the economic health of the United States and China, as measured by growth in gross domestic product (GDP).
United States: MINUS 1 percent in the second quarter of 2009.
China: PLUS 14.9 percent in the second quarter of 2009.
Now, back to our regularly scheduled discussion.
As Dave Johnson at the Campaign for America’s Future writes, free trade might be nice in a perfect world. But if the world were perfect, we wouldn’t need police, either.
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.
But when it comes to doing what every major nation does, protect its own economic interests—China’s economy is not skyrocketing by accident—certain powerful interests are doing just fine now and they want things kept that way.
So they will fight against change 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.
In short, federal policies are necessary to encourage competitors to pay better wages, improve worker safety and/or stop polluting.
This way [other nations’ economies and environment] could improve and their workers would be able to buy the things that we make.
And so utilizing our trade laws, as did Obama, can improve living standards for workers everywhere, while growing our economy and improving our standard of living in the process.
Tires are a small part of the bigger picture. But this example illustrates not only why the United States must have—for lack of a better phrase—an "industrial policy" so each nut, bolt and tire doesn’t have to be ruled on in an ad hoc basis. We must make things to prosper. The last word, natch, from Gerard:
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.