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Scott N. Paul

By Scott Paul
Executive Director of Alliance for American Manufacturing (AAM)

Nearly one year ago, President Obama invoked a trade law known as “421″ for the first and only time in the decade the law has been in effect and imposed tariffs on some automobile tire imports from China, which have been surging into the United States from 2004 to 2008.

The decision was very controversial. Most editorials weighed in against it, the Chinese government threatened retaliation, and some of the more hysterical pundits predicted a death-spiral trade war. The Chinese government, the outsourcing lobby, and the large school of free trade economists all predicted that the relief would not accomplish its goal of reviving production, jobs, and market share for American-made tires in the domestic market.

I’m pleased to report to you that these skeptics were all dreadfully wrong. The sky hasn’t fallen. A trade war never materialized. And, America’s tire workers and domestic facilities are recording gains in jobs, production, and market share.

First, let’s review where the domestic tire industry stood at the end of 2008:

• production declined from 218.4 million tires to 160.3 million tires during 2004-2008;
• capacity utilization declined from 96.3% to 86.0% during 2004-2008;
• U.S. producer commercial U.S. shipments declined from 194.7 million tires to 136.8 million tires during 2004-2008;
• employment data on number of production workers, hours worked, and wages all declined substantially between 2004 and 2008; and,
• consumer tire imports from China increased 215 percent by volume (from 14.57 million tires to 45.98 million tires) and nearly 300 percent by value (from $453 million to $1.788 billion) between 2004 and 2008.

Now, what has happened since the relief took effect? Publicly available data compiled in a report released by the Alliance for American Manufacturing on September 1st concludes that production by U.S. facilities has increased over 15 percent, or by more than 10 million tires, based on Rubber Manufacturing Association data. Domestic producers such as Goodyear and Cooper Tires have experienced productions gains of between 9 and 35 percent. (more…)

Leo W. Gerard

By Leo W. Gerard
International President

My union, the United Steelworkers (USW), and three paper manufacturers will have free traders and editorial boards across the nation sputtering, spitting and name calling again this week.

They started labeling us “protectionist” last week when President Obama made what should have been considered a straightforward decision. He implemented a recommendation from the independent, bi-partisan International Trade Commission (ITC) to place tariffs on tires imported from China. The USW had started that process by seeking sanctions in April under special trade safeguard rules, called Section 421, which the Chinese had agreed to obey to gain entrance to the World Trade Organization.

Now we’ve filed a new trade case. We did it with no disrespect or lack of hospitality toward Chinese officials as they arrived in the city of our international headquarters  – Pittsburgh – for the G-20 summit. Proof of that is we included as a defendant in this case China’s fellow G-20 country of Indonesia, who can keep them company in court.

This is not a Section 421 but a more traditional unfair trade case about coated paper, the kind used for car brochures and annual reports. In 2007, the U.S. Department of Commerce found egregious dumping of this paper and improper subsidies by the Chinese and Indonesian governments. But later the ITC refused to impose sanctions because it decided the U.S. industry hadn’t been adequately injured.

We believe we’ve suffered sufficiently now.

But we know the free traders and editorial boarders will vilify us. They’ve taken up with the Chinese government. And let me be clear that I mean government. The USW is in solidarity with Chinese and Indonesian workers who suffer abuse at the hands of their employers. It is governmental policies that injure us both and that we oppose. Our intent is to hold governments to promises they made to abide by international trade regulations – pledges sworn to gain entrance to the World Trade Organization.

Those rules were meant to make free trade fair.

We want fair trade. Geez. They’ll call us “protectionist” for that – like they did with the tire tariff decision. The New York Times derided the tire tariff a “protectionist remedy.” The Chicago Tribune slammed it as “blatantly protectionist.” A Wall Street Journal columnist said Obama imposed the tariff, not because it was recommended by the ITC, but because the president “owed favors to his friends in Big Labor.” 

These people don’t know what they are talking about. The New York Times, for example, said, “China has not been competing unfairly on tires – just more effectively, mainly because of its far lower labor costs.”

It is unfair trade to abuse workers by not paying them your own country’s minimum wage, by failing to give them your own country’s required days off and other benefits, by exposing them  to grossly hazardous working conditions. Has the New York Times investigated the Chinese tire workers’ situation, the way it has other Chinese workers’, to determine if they are being mistreated in these ways like so many Chinese workers? If so, it provided no evidence.

In addition, just two paragraphs later, the Times lists numerous unfair trading practices it acknowledges China engages in, practices that give it unfair advantages when selling tires on the U.S. market, including manipulating its currency. Those advantages are far more significant to the price of tires than labor costs.

Similarly, the Chicago Tribune editorial was written by someone who apparently did precious little research. It claims the tire tariffs will cause “whopping price hikes,” even though Charles Uthus, vice president of the Automotive Trade Policy Council, which opposed sanctions, calculated that the additional cost per tire, at the tariffs recommended by the ITC but later lowered by Obama, would be no more than $3.50. The Tribune says the tariffs will not bring jobs back home – but the ITC determined they would. Best of all, the Tribune asserts that the tariffs will prompt manufacturers to move production from China to countries without tariffs. Really? Tariffs that will last only three years will prompt manufacturers to abandon plants that cost $180 million to build?

These people are in love with an ideal: Free trade. It doesn’t exist between the U.S. and China. The rules of free trade prohibit subsidizing exports, forcing foreign investors to transfer technology and mandating foreign manufacturers export all products made in the host country. China so routinely does such prohibited stuff that Cooper Tire provided sworn testimony about it in our Section 421 case. Cooper testified that China required Cooper to export all of the tires from its new Chinese plant for five years. 

China cheats. We’re just asking that they follow the rules they agreed to when they joined the World Trade Organization – the same sort of rules they will be discussing this week at the G-20. That’s not protectionism.

The free traders and the editorial boarders also belittled the tire case because none of the tire companies joined the USW. It should be obvious why companies like Cooper could not. And let’s make it clear, Goodyear, which has agreed to invest $600 million in its U.S. plants, made a point of remaining neutral.

In the paper case, the free traders are going to have to choke back that scorn. Three manufacturers are in it with us: Appleton Coated LLC, NewPage Corp., and Sappi Fine Paper North America . Two of them, Sappi and NewPage, have been forced to close plants in the two years since the ITC didn’t see enough damage in the U.S. market to impose sanctions in 2007. Those shut downs cost nearly 1,000 workers their jobs and severely injured the mill towns of Muskegon, Mich., and Kimberly, Wis.

Don’t just take my word, the word of someone who the Wall Street Journal would dismiss as “protectionist Big Labor,” owed a big favor by President Obama. Listen to what businessmen have to say about China and Indonesia:

This is John Cappy, president and CEO of Appleton, “Our goal is to restore fair competition to the marketplace. We are willing to compete with anyone on a fair playing field.”

Here is Rick Willett, president and CEO of NewPage talking about China, “What we want here is simply enforcement of the rules they signed on to in order to be part of the World Trade Organization.” 

And, finally, there’s Mark Gardner, president and CEO of Sappi, who explains that his company clearly believes in free trade because it imports paper made in its European mills to the United States as well as manufacturing paper here: “We want the laws enforced so we can compete on a fair basis.”

Hey, Wall Street Journal, how about those CEOs?

Scott N. Paul

By Scott N. Paul
Executive Director Alliance for American Manufacturing

President Obama deserves credit for making a tough call on trade.  On September 11, he decided to impose tariffs on consumer tires from China for the next three years, resisting the pleas of most opinion elites across the nation and one of the principal financiers of our massive public debt: China’s government. 

Though many industries have been battered by imports from China, the safeguard mechanism permitted under rules China agreed to upon entering the World Trade Organization eight years ago has never been invoked before this month.  While the merits of the trade case filed by the United Steelworkers (USW) union seeking relief from a massive surge of imported Chinese consumer tires were quite clear, an absurd mythology has encompassed it.

Even though the International Trade Commission (ITC) recommended tariffs after hearing copious evidence from importers and the Chinese tire industry as well as from the USW (which represent tire workers), opponents of the tariffs still insist that the decision will be counterproductive, raising prices while creating jobs in other importing nations.  That is complete nonsense.  No other exporter can replace the market share of consumer tires that China currently holds.  Goodyear has indicated that it will invest $600 million in its American tire manufacturing facilities, making it highly likely that the tariffs will allow for some capital investments in the domestic tire industry and put tire workers back on the job.  Prices for tires—if they rise at all—will increase by $3 per tire according to the ITC, while the economic benefits to the nation, in the form of jobs and wages saved, taxes paid, and corporate profits—will more than double that. 

Some critics of the tariffs have pointed to potential retaliation by China against U.S.-produced chicken feet and auto parts.  This is merely bluster by Beijing, which is not normally held to account on trade issues.  For eight years, China has not faced serious sanctions for a beggar-thy-neighbor, mercantilist trade policy.  But remember this: China depends on access to the U.S. market for its own employment and growth, and will not ultimately risk its livelihood to make a point. 

Others believe that the outcome of this case will lead to the filing of even more import surge cases against China by industries such as textiles or steel.  The sad fact is that scores of American industries have seen an import surge from China.  While a few more cases may be in the offing, a far more likely outcome of the tire case is a serious bilateral negotiation between the U.S. and China to address a number of trade irritants, such as massive industrial subsidies, lack of market access, intellectual property theft, persistent dumping, and an exchange rate that most economists believe is dramatically undervalued and misaligned. 

Does anyone still believe it is a good thing to outsource not only our manufacturing but also our debt financing to China?  The tire decision alone will not change this equation, but it could chart a better course for America. 

Revitalizing manufacturing, reducing our trade imbalances and bringing down our public debt are interconnected.  The tire trade decision alone will not accomplish these goals, but it may lead lawmakers to embrace a new strategy to grow manufacturing in this nation.  Trade enforcement as articulated by President Obama is an essential component of that strategy, but it is only part of the equation.  We need a results-oriented trade policy, one that recognizes the importance of opening new markets as well as enforcing the rules.  It is refreshing to see a pragmatic national leader on trade after so many years of benign neglect.

***

This piece was first published in the Detroit News.

Tire, tariff, free trade, fair trade, manufacturing, President Barack Obama, China, United Steelworkers, USW, World Trade Organization, International Trade Commission, ITC, exports, Goodyear,

Leo W. Gerard

By Leo W. Gerard
International President

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 imposed 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.

Sometime before Sept. 17, President Obama has to make a decision that will tell us a lot about his commitment to American manufacturing. By that date, Obama has to accept, reject or modify a recommendation from the International Trade Commission (ITC) to impose tariffs on the Chinese-made tires that are swamping the U.S. market.

The importance of this battle goes well beyond its impact on the tire industry. Much of Americans’ skepticism toward free trade comes from their empirically verifiable sense that their government has been reluctant to enforce its own trade laws — an issue that candidate Obama tackled head-on last year by his repeated pledges to enforce those laws.

Between 2004 and 2008, tire imports from China increased 215 percent, while imports from other nations decreased 5 percent and U.S. tire production declined 27 percent. The ITC found this a clear violation of a provision in the Trade Act (Section 421), added with Beijing’s consent during the negotiations preceding Congress’s 2000 enactment of Permanent Normalized Trade Relations with China, that allowed the U.S. government to levy tariffs on surging Chinese imports that were eviscerating an American industry.

Indeed, China’s agreement to the anti-surge provision was a key argument in persuading Congress to permanently normalize trade relations. Section 421, contended Montana Sen. Max Baucus, a leading free-trader, “ensures that if shifts in trade patterns, following China’s entry into the world trading system, cause or threaten dislocations to American workers, businesses and farmers, they will be able to obtain relief quickly.”

Or not, as the case may be. Four times during George W. Bush’s presidency the ITC — a bipartisan, presidentially appointed commission — recommended invoking Section 421 to counter surges of Chinese imports that were damaging American industries, and four times Bush declined its advice. The Chinese tire ruling is the first such case to reach Obama’s desk; the ITC that sent it there comprises Bush appointees and one Clinton appointee, but none as yet from Obama.

Whatever its outcome, the case of the Chinese tires provides a revealing snapshot of the U.S. economy in the early 21st century. For one thing, the petitioner is the United Steelworkers union, which the rubber workers union merged into some years back. No U.S. tire companies joined the complaint, and it’s easy to understand why: Almost all the leading tire manufacturers with major production facilities here — including Bridgestone, Cooper, Goodyear, Michelin and Pirelli — also have factories in China. What’s more, the Chinese government often requires those factories to export all the tires they make. Cooper has opened two such factories under a government mandate stipulating that every one of their tires be exported for their first five years.

America’s leading manufacturers, whether U.S.- or foreign-owned, no longer have American interests. In fact, by producing in China, they almost invariably opt, like Cooper, to serve Chinese interests. American workers, by contrast, can’t generally cross oceans to follow their erstwhile employers, and the jobs they pick up when their factories close are likely to be in the lower-paying retail and service sectors.

Critics of the ITC ruling have argued that U.S. tire factories no longer produce the kind of low-end tires that China exports, but the ITC concluded that fully 20 percent of U.S.-made tires are inexpensive and directly compete with their Chinese counterparts. Critics have also predicted a soaring increase in the cost of tires, but the ITC’s staff analysis forecast an increase of only $3.50 per tire — not nothing, to be sure, but a cost that has to be measured against the possibility of tens of thousands of job losses in U.S. tire factories (where more than 5,000 jobs already have been lost because of Chinese imports).

The implications of Obama’s decision go well beyond tires. Section 421 was created to provide some protection for American workers while allowing China entry to our markets. If Obama opts not to enforce it, why would anyone concerned about American jobs believe such provisions in future trade agreements? Why would U.S. manufacturers maintain their domestic production if they know that none of the legal protections they’ve been promised will ever be invoked?

The financial crisis that was already raging when Obama became president compelled him to do more to rescue Wall Street than he surely ever wished. Endorsing the ITC’s recommendation would not only honor his campaign promises and fulfill the mandates of our trade laws, but would also allow him to rescue the very Americans who, rightly or wrongly, have felt left out of his efforts to save the nation’s economy.

***

Harold Meyerson also is political editor and columnist for the L.A. Weekly, the nation’s largest metropolitan weekly, and a regular contributor to The Washington Post, where this piece originally appeared.

Leo W. Gerard, USW International President

“The Toxic Trader,” a drama featuring an evil puppet, premiered last Tuesday in a special election-day staging outside U.S. Sen. Gordon Smith’s district office in Portland, Oregon.

Toxic Trader. Yes, the double entendre is deliberate. The street theater is intended to hold free traders like Smith and presumptive Republican Presidential nominee Sen. John McCain accountable for millions of U.S. jobs lost as multinationals move U.S. manufacturing overseas and for deadly imports – like faked Heparin medication and melamine-poisoned dog food — shipped into this country. (more…)