Why seeking trade barriers just got a lot easier

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My story is up on the website this morning about U.S. industries lining up to seek protections from President Obama similar to the tariff he imposed Friday on Chinese tires.

U.S. interests were already indicating this week that Mr. Obama’s decision late Friday to levy a 35 percent tariff against Chinese tires had increased their interest in seeking protections through the same venue at the International Trade Commission - called a “421 remedy” under the 1974 Trade Act - that handed the United Steel Workers a victory in the tires case.

“The decision on Friday certainly resolves a question which was in a lot of industries’ minds, which was whether 421 was a viable option,” said Cass Johnson, president of the National Council of Textile Organizations (NCTO).

“It’s certainly something we’re going to look at more closely than we have before,” he added.

The textile industry may be the first to lodge a complaint against Chinese competitors, particularly importers of medium and low-end trousers, underwear, shirts and socks. U.S. textile firms have been seeking protections since before Mr. Obama took office, charging that the Chinese have been “dumping” into the U.S. market - selling their products for less than they cost to produce.

What got cut out of the article for space reasons was a lot of the background on why the so-called “421 remedy” is a much more attractive option than has existed before.

Here’s why. Complaints brought under Section 421 of the 1974 Trade Act [-] which was added to the law during the 2001 negotiations over China’s admission into the World Trade Organization [-] are more palatable to industry because there is a lower threshold required for a favorable ruling.

President George W. Bush was presented with four cases brought under Section 421, and declined to erect barriers in all four cases.

In the case of the tires decision, the ITC cited the fact that the U.S. tire industry has lost around 5,000 jobs (and might lose another 3,000) and that there are low-priced Chinese tires in the U.S. market.

“In just four years, tire imports here surged from 15 million to over 45 million. Prices were undercut by that. There was a 30 percent displacement in terms of American production, and about 5,000 American jobs were lost,” said Rep. Sander Levin, Michigan Democrat, in an appearance on “The News Hour with Jim Lehrer” Tuesday night.

The United Steel Workers, which brought the case to the ITC, argued that the Chinese were dumping tires into the U.S. market and subsidizing their tire manufacturers, but was not required to prove either charge. Penalties for dumping and subsidization require a longer process to establish the practice, though the tariffs imposed usually stay in place for longer than 421 penalties, which in the tires case were imposed for three years.

And in fact, Mr. Obama’s tariff decision is not the first trade barrier erected recently against the Chinese. The Commerce Department last week decided to impose preliminary tariffs against Chinese imports of steel pipe used in oil and gas drilling explortation as they continue to investigate whether Beijing is illegally subsidizing that supply and whether the Chinese steel companies are dumping their product.

Those preliminary tariffs can go as high as 30 percent, said Kevin Dempsey, a senior vice president at the American Iron and Steel Institute. They could be imposed for up to five years depending on the Commerce Department’s final ruling.

“We are now going down a slippery slope … No one wanted a trade war but we are getting one anyway,” said Jim Rickards, an executive at Omnis Inc. and an expert on U.S.-China relations. “It happens in increments and gets out of control before anyone realizes it and then it’s too late to turn back because of political dynamics.”

“In small ways and on various matters [-] rare earth minerals, chicken, tires, gold, treasury debt maturity structures [-] the U.S. and China are becoming increasingly adversarial and confrontational in the financial and trade battlespace.”

A White House aide said privately that “China agreed to the safeguard mechanism used in [the tire] case as part of its accession to the WTO.”

Going forward, the aide said, “each case will be considered on its individual merits.”

Nonetheless, all of this sets up a difficult situation for both parties as they head to Pittsburgh next week for a summit of the world’s largest economies. The Group of 20’s previous two meetings over the past year have focused significantly on expressions against protectionism.

But a 558-word statement from Mr. Obama last week on the summit did not mention trade liberalization or protectionism. The White House said the statement did not capture the entirety of the president’s agenda for the meeting.

— Jon Ward, White House reporter, The Washington Times

Follow me on Twitter // jward@washingtontimes.com // Read my latest articles here // My YouTube channel

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