Obama sends a message that the trade climate is changing

Obama sends a message that the trade climate is changing

There are those who will call President Barack Obama’s action Friday to impose tariffs on tires imported from China as protectionism, but it isn’t. Obama’s action was a recognition that the United States cannot stand idly by while it sees additional segments of its manufacturing base eaten up by unfair competition.

One man’s protectionism is another man’s self preservation. In this case Obama was acting within the law to preserve what is left of the domestic tire industry.

It is unlikely that the president’s action will result in re-establishing U.S. production lines for the low-priced tires that are now being made in China. Tire retailers will either raise their prices or cut their profit margins to adsorb the tariffs, or they will shift their purchases from Chinese plants to other nations, such as Brazil or Mexico.

But that does not mean Obama’s action was an empty gesture. It sent an important message to China that the United States is no longer willing to watch as China undercuts U.S. production of tires, pipe, steel or other products.

Idle threats mean idle workers

Too often, even when the United States was well within its legal rights to fight the extraordinary acceleration of low-priced imports, it chose inaction. And the result was a predictable erosion of American manufacturing jobs and a ballooning of the trade deficit between the United States and China.

Congress passed legislation in 2000 that allows the United States to impose tariffs and other trade protections if a surge in Chinese imports damages a U.S. industry.

China agreed to the provision while negotiating to join the World Trade Organization, but the general “safeguard” provisions of the law had not been invoked — until now.

The howls of protest from China are predictable, regardless of what it may have agreed to while it was working its way into the WTO. And regardless of President Obama’s restraint in imposing lower tariffs than had been suggested. Taking note of an increase in U.S. imports of cheap Chinese tires from $453 million in 2004 to $1.7 billion in 2008, the U.S. International Trade Commission recommended that the president impose a 55 percent tariff on Chinese tires next year, a 45 percent tariff in 2011 and a 35 percent tariff in 2012 — before the China “safeguard” provision expires in 2013.

Obama lessened those penalties to 35 percent the first year, 30 percent the second and 25 percent the third.

Good time for a message

The president’s action is of particular note coming on the eve of the opening of the Group of 20 summit in Pittsburgh, where world leaders are expected to discuss cooperation on trade issues. It sends a message that the United States is no longer willing to allow other countries to keep their workers on the job at the expense of Americans workers being put out on the street.

Since 1985, the trade deficit between the United States and China has grown dramatically, and always in China’s favor. In 2008, China bought about $70 billion worth of goods from the United States and sold $338 billion worth of its products in the United States. For every $1 the Chinese spent on American goods, Americans spent nearly $5 on Chinese products. China routinely ignored U.S. complaints that China was manipulating its currency to make its exports cheaper and to inflate the cost of U.S. goods in China or that China ignored violations of U.S. patents and copyrights.

Now a U.S. president has not spoken softly, he has swung a big stick. China would be wise to recognize that it has gotten away with the murder of American manufacturing jobs for a generation. The United States is willing to be a trading partner, not a trading patsy.