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China will resort to 'old ways' without tariff

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Politicians are jumping on the wagon to tout the tires produced in their states while also asking the U.S. International Trade Commission (ITC) to formally approve countervailing and anti-dumping duties on passenger and light truck tires made in China.

The issue doesn’t follow party lines, but seems to follow tire factories. Republican Senators Rob Portman of Ohio and Richard Burr of North Carolina joined Democratic Senators Mark Warner of Virginia and Chuck Schumer of New York in submitting written testimony in advance of an ITC hearing on June 9, 2015. Other lawmakers are testifying in person.

The ITC, as well as the International Trade Administration (ITA), both make determinations on tariff issues. If both entities determine the U.S. tire business is being threatened by the sales of Chinese tires, then the Department of Commerce will issue a final order to implement a tariff. The ITA is scheduled to announce its final ruling on Friday, June 12, 2015.

Portman, a former U.S. trade representative, points to the Tariff 421 which expired in September 2012. “Imports from China surged back into the U.S. market, jumping by 66% in just the first quarter after the duties ended. Imports have continued to increase, and they have grown by more than 26 million tires, or 84%, from 2012 to 2014.

“And these tire imports were not increasing because of market fundamentals; their rise was enabled by an array of unfair trade practices.”

Portman points to Cooper Tire & Rubber Co.’s production in Findlay, Ohio. Daily production dropped from 21,500 to 17,400 tires a day after the Tariff 421 expired in 2012, according to the prior testimony of the local union president.

Warner too uses the earlier tariff as an example. “If not for the safeguard relief, the bleeding of the domestic industry would have only gotten worse.

“The record that is before the (ITC) today shows that the domestic tire industry benefitted immensely from the safeguard relief. I am deeply concerned that the renewed flood of unfairly traded imports from China is now eroding those benefits in just two years since the safeguard expired.”

Warner’s example comes courtesy of Yokohama Tire Corp.’s plant in Salem, Va. When Tariff 421 was in place, the plant was producing 18,000 tires a day, but production has dropped steadily since the tariff expired. By June 2014 production fell to 15,100 tires daily, and at the end of 2014 it had fallen again to 11,000 tires a day — “a stunning 39% decline from the peak when the safeguard was in place.” Since the preliminary duties were imposed by the Department of Commerce, Warner says production has begun to turn around, to 13,500 tires a day.

“Subsequent events after the safeguard tariffs expired demonstrate that unless duties are maintained, Chinese producers will resort to their old ways and again flood the U.S. market with dumped and subsidized tires,” Warner says.

In North Carolina, Burr has two tire manufacturers to consider, Bridgestone Americas Inc. and Goodyear Tire & Rubber Co. “They employ thousands of workers, and they have significant indirect economic benefits for their local communities and the state of North Carolina.

“Rising Chinese imports have undercut U.S. prices and taken market share from domestic producers, resulting in reduced production, sales and employment.”

Schumer says China has increased its tire producing capacity by 400% since 2004. He says there’s evidence the increased capacity “is a direct result of China’s domestic policies and the generous subsidies that China’s government has provided their tire producers, not to mention the Chinese government’s well-documented manipulation of its currency.”

The New York senator uses Goodyear’s rubber facility in Niagara Falls and its tire plant in Buffalo as the background for his remarks. He doesn’t mention the Buffalo plant by year’s end will be fully owned by Sumitomo Rubber Industries Ltd., thanks to the end of Sumitomo and Goodyear’s alliance. (See Will Sumitomo build Falken tires in Buffalo?)

“It is clear that if the duties are not in place, China’s producers will again cause economic harm to our industry. As we know from past trade remedy cases, China is an inveterate trade cheat,” Schumer says. “There are six times as many duty orders in place against China than any other country. There are many steps we need to take to rebalance our trade relationship with China, but the question before this commission is one of enforcing the laws already on the books.”

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