WASHINGTON (Reuters) - A U.S. trade panel said on Thursday China was unfairly flooding the U.S. market with tires, the first step in a test case of how the Obama administration will handle trade disputes with Beijing.
In a 4-2 vote, the International Trade Commission found that a surge of low-cost tires from China had disrupted U.S. markets. Later this month, it will recommend a remedy to President Barack Obama.
The United Steelworkers union, which brought the complaint arguing that the imports have cost thousands of U.S. jobs, wants Obama to cap Chinese tire imports at their 2005 level.
Responding to the ruling, USW president Leo Gerard said the union hoped Obama would keep “a campaign pledge to crack down on China’s unfair trading practices.”
“Our domestic industries cannot survive unless our government enforces the trade laws that are designed to curb and dissuade anti-competitive practices that cause market disruptions,” Gerard said in a statement.
Lawyers representing Chinese tire producers argue that U.S. companies largely abandoned the low-range tire market before Chinese manufacturers moved in. They also noted that no U.S. tire producers had joined the steelworkers’ complaint.
The U.S.-based Tire Industry Association, an international group that represents all segments of the tire industry, called the USW petition a “protectionist” move.
Vic Delorio, executive vice president of Chinese tire maker GITI, said he was disappointed but did not believe U.S. manufacturers would increase production of low-cost tires.
“Instead, if there is a barrier placed on tires produced in China, we believe that U.S. manufacturers will simply increase importation of tires from other countries, such as Poland and Venezuela,” he said. “We also believe that quotas or tariffs will lead to higher costs for American consumers.”
The commission is expected to recommend a remedy by the end of June. A presidential decision is not due until September.
Trade experts are watching to see whether Obama, who won strong labor support in his bid for the White House, will be tougher on China than predecessor George W. Bush, who routinely rejected petitions for restricting imports from Beijing.
Democratic lawmakers backing the steelworkers’s complaint hope Obama will use the case to chart a new course of tougher enforcement of trade laws, which allow quotas in some cases.
The steelworkers want Obama to restrict Chinese tire imports to 21 million, the 2005 level, with an increase of five percent per year over a three-year period.
The union said some 5,100 U.S. workers have lost jobs because of low-price Chinese tire imports, and another 3,000 jobs were at risk this year. The imports increased 215 percent in volume from 2004 to 2008, hitting 46 million tires worth $1.7 billion in 2008, the union said.
It cited closings of U.S. plants by Goodyear, Continental Tire, and Bridgestone/Firestone, and said more closings are pending.
The case is one of several prickly trade issues between the United States and China, Washington’s second-largest trading partner. Tensions have been exacerbated by the growth in the U.S. trade deficit.
Last month the International Trade Commission voted in favor of a government anti-dumping probe that could lead to steep U.S. duties on an estimated $2.6 billion worth of Chinese steel pipe used in oil production.
The Alliance for American Manufacturing called Thursday’s decision in the tire case “good news.”
“As with so many other manufactured products from China, its tire industry benefits from illegal government subsidies, labor exploitation, lax environmental standards, and illegal currency manipulation. As a result, U.S. producers, who play by the rules, can’t fairly compete,” a statement said.
Editing by Anthony Boadle