Tariff on Surging Chinese Tires Effective in First Year; U.S. Production & Market Share Up, Job Losses Reverse

Report Shows Obama's Enforced Relief under Sect. 421 of Trade Law Working

PITTSBURGH, Sept. 1 /PRNewswire-USNewswire/ -- With the one-year anniversary of President Obama's decision to provide relief on imports of 'Certain Passenger Vehicle and Light Truck Tires from China' approaching, the United Steelworkers (USW) pointed to a report issued today by the Alliance for American Manufacturing (AAM) that shows the tariff is achieving the desired positive effect on U.S. tire manufacturers and their workforce.

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"The relief provided by President Obama is fulfilling a promise that permitted China's entry into the World Trade Organization – and that promise was American workers and companies would not be harmed by non-market economy distortions in China," said USW International President Leo W. Gerard.

"With relief in place, American workers are finally beginning to see jobs return to their communities. We must maintain that momentum and allow the tariffs to stay in effect for the full three years," Gerard said. "To do otherwise would be to break the repeated promise to American workers and companies that they would not be unfairly harmed."

The USW in 2009 sought an investigation into an unprecedented surge of Chinese tires under Section 421 of the Trade Act of 1974, which was designed to give the domestic industry and its workers breathing room from surging imports.

"Section 421 of the trade law is doing what it is intended to do," Gerard added. "As AAM's report clearly defines, it has reversed a massive decline in domestic production and provided much needed relief to workers, their employers and communities from a flood of Chinese tires."

The Trade Act provision was an important commitment made by the Chinese to permit its entry into the World Trade Organization (WTO). It was designed to facilitate the mutually beneficial growth in trade by reducing the adverse effects of distortions inherent in China's non-market economy.

Widely recognized market distortions in the state-controlled Chinese economy include exchange rate management, massive government subsidies and help from state banks. In addition, China's industrial policies and practices regarding export requirements for investors, technology transfers and non-tariff barriers to trade are inconsistent with WTO rules.

When the International Trade Commission (ITC) examined the surge in tire imports from China, it discovered material injury to the domestic industry through continuous declines in U.S. producer's domestic capacity, production, shipments and employment from 2004 to 2008, a period of general economic growth.

Notably, domestic capacity declined from 226.8 million tires to 186.4 million tires during the four-year period while actual production dropped from 218.4 million tires to 160.3 million tires.

As capacity utilization fell from 96.3 percent to 86 percent, the number of production workers substantially declined as did their hours worked and wages.

"There is no doubt that the relief authorized by the President has reversed the massive decline in domestic production," said USW International Vice President Tom Conway, who heads negotiations with Goodyear.

"Goodyear plants producing 421 subject tires hired 130 new workers in 2010 and are working an average of 20 percent overtime. Cooper Tire in Texarkana, Ark., has 250 new hourly hires. The plant is running seven days a week and production is up around 20 percent," he said.

The impact at Michelin plants manufacturing covered tires under BF Goodrich and Uniroyal brands is similar. Operations now run seven days a week; overtime is up to 15 percent, and 115 new production workers have been hired since the start of 2010. At Cooper Tire & Rubber in Findlay, Ohio, 100 new hourly employees have been hired since the relief went into effect; operations have returned to a seven-day work schedule; and production has increased 20 percent.

Since the 2009 recession, tire production by U.S. producers has increased significantly. Consumption has also increased as the price discrepancy between American and Chinese produced tires diminished.

China has not been harmed. There has been robust demand for cars and trucks within China, and many of the Chinese tire makers turned their focus to their own domestic market.

A full copy of AAM's new report, "Obama's Bold Economic Move on Chinese Tire Imports is Paying Off," is available at: http://www.usw.org/tires.

SOURCE United Steelworkers (USW)