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Obama's Tire Tariff

The president imposes a 35 percent tariff on car tires imported from China.

12:00 AM, Sep 13, 2009 • By IRWIN M. STELZER
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With all 40 of the eyes of G20 finance ministers riveted on the questions of bankers' bonuses and exit strategies when they met in London, the issue of creeping protectionism seems to have been ignored, or at least kept out of public view. Not a bad idea from the point of view of the world leaders due for a follow-up meeting. After all, they unanimously pledged at the previous summits in Washington and London to avoid protectionist measures, and then dashed home to adopt a record number of such measures.

Avoidance of trade talk would most especially suit the American delegation: when the leaders meet in Pittsburgh on September 24-25 the last thing President Obama wants is a discussion of his position on trade. He has so far managed to talk the talk of free trade while walking the protectionist walk that appeals to his trade union backers. He would like to keep it that way.

Unfortunately for him, he won't be able to do that, having just come down on the side of the protectionists. The Obama team makes it a practice of releasing announcements of which they are not particularly proud on weekends, when they get buried under sports news and the commentariat are out of town. So they held off until late Friday announcing that the President has imposed a 35 percent tariff on low-grade car tires imported from China. The International Trade Commission (ITC) had responded to a complaint by the United Steelworkers Union (tire workers are members of that union) that Chinese imports have cost them 5,000 jobs by recommending tariffs of 55 percent. Significantly, U.S. tire manufacturers did not join in the complaint: they lose money at the low-end of the tire market, and most have simply abandoned it to the Chinese. Whether Obama will claim that 35 percent is so far below 55 percent that his free trade credentials remain intact is doubtful: even by his standards, that would be a brazen attempt to conceal his capitulation to the trade unions.

So picture this. Obama now has to play host to a very angry Chinese President Hu Jintao, among other world leaders, in Pittsburgh, to all of whom he promised not to repeat the beggar-thy-neighbor protectionist policies that extended the Great Depression. He needs the Chinese to continue buying the IOUs he is pouring onto the market to cover the deficits he is running up, and to allow their currency to appreciate relative to the sinking dollar. Hu needs export-based jobs. The Obama charm might just not be enough to send the Chinese president home in a generous mood, or disinclined to continue his ruminations on how to free the world of the dominance of the dollar.

Obama's decision on tires makes it clear that he has no intention of supporting efforts to revive the almost 8-year-old Doha trade-opening negotiations. Some 36 nations met in New Delhi earlier this month and professed interest in completing a deal by the end of next year. Not likely: the recession has made jobs, jobs, jobs politicians' central concern, and few are prepared to take the flak that will surely arise if they open their markets, and expose even a few domestic companies or farmers to job-destroying competition. The talks collapsed in July of 2008 precisely for that reason. Obama has been sitting on proposals for bilateral free trade agreements with Colombia and Korea, among others, and sees no reason to antagonize the strong, protectionist wing of his party, already unhappy with his failure -- so far - to throw his weight behind a bill that would end the secret ballot in union-recognition elections, and require compulsory arbitration when union-management negotiations break down.

He will have to find some way to placate Canadian Prime Minister Stephen Harper. Some 250 Canadian manufacturers have been effectively excluded from bidding for infrastructure work in the U.S. by the "Buy American" provision of America's $787 billion stimulus program, and Harper was not satisfied with the president's typically opaque pronouncement at an earlier meeting, "It [Buy American] was not something that I thought was necessary, but it was introduced at a time when we had a very severe economic recession. We have not seen some sweeping steps towards protectionism." Harper intends to raise the issue again in Pittsburgh. And remind the president that the North Atlantic Free Trade Agreement prohibits just such restrictions on Canadian goods. Now, it is clear that Harper can huff and puff, but he is unlikely to blow down the protectionist wall that the president is erecting.