http://www.atimes.com/atimes/China_Business/HF15Cb05.html Want to sell cars in China. You only have to overcome a 25 percent tariff. They are dropping it 3 percent. Dropping what…TARIFFS’
China Tariffs On The Way Oh yes,China is guilty of dumping.
It remains true. You guys are suckers.
Sure, there’s no harm in starting a debate by just saying “Here’s the issue and here’s what I personally think about it”, and leaving other posters to follow up with the “on the other hand” arguments.
However, I think it’s important to express one’s opinions rationally and focus on the issues where disagreement is interesting, rather than just stirring up shit. Sam’s OP was basically just a rant, not an invitation to debate a serious question about temporary domestic protection policies in trade agreements.
If anyone would actually like to debate a serious question about temporary domestic protection policies in trade agreements and its implications for the new Chinese tire tariff, I would be very interested in reading that debate and would doubtless learn a lot from it.
If some people would rather just spend the thread ranting about how the idiot Obama liberals are wantonly screwing over the US economy just to gratify their socialist protectionist ideology, well, that’s up to them.
AFAIK, the dumping question is essentially irrelevant. The safeguard tariffs can be imposed to protect against import surges even if the trading partner isn’t guilty of dumping, but they don’t have to be imposed even if the trading partner is dumping.
See what happens when you start off a debate thread with a rant? The meanie talk just goes on propagating.
People who use the terms like" Free trade " ,generally have been taught such a thing exists in America. It never did. Does not now and will not.
Why is dumping irrelevant? The point I am making is that China has no respect for free trade. They are using it to carve out an advantage. They know if they claim we are being protectionist. many Americans will buy it. They will do the work for them. They will complain about how we are betraying principles, which have never existed. Yet they reserve the right to be as protectionist as they want. They have been caught playing dirty many times. It is their policy. They do not want free trade. It benefits them if we force our politicians to eliminate protection for our companies and workers, while they continue protecting theirs. Suckers.
Not in the sense of ideal free markets, no, but ISTM that there certainly is a spectrum of “freeness” in trade. Just because there’s no such thing as ideal free trade doesn’t mean that tariffs can’t be harmful.
It’s irrelevant to the legal basis for safeguard tariffs, which can (but need not be) imposed whenever a sudden import surge exceeds an agreed-upon threshold for any reason, not just as a result of dumping. AFAICT, it has not been argued that China is dumping its tires:
Personally, I think concerns are overinflated.
I actually mentioned at the very beginning of the thread that the tariff was temporary, in fact that’s one of the big reasons I genuinely doubted the effectiveness of the tariff itself. In the case of the Harley-Davidson tariff you saw a case of a U.S. business about to be forced out of business by foreign competition. In the case of the tire business that wasn’t the case, you have U.S. tire importers whose entire business was moving these Chinese tires into America, and then you had some major tire makers who have already established tire manufacturing operations in China. Like I said up thread, factories are such a large capital investment I don’t expect that a few year tariff is going to cause these tire manufacturers to bring tire manufacturing back to the United States.
A tariff can definitely do what was done in the 80s: stop a company from going under, but they can’t force companies to make drastic and long term decisions when the tariff is short term in nature. Essentially, a company isn’t going to change how it does business simply because of a 3-4 year price increase. Once a company has moved operations overseas I don’t really think anything can force them to move it back.
The big difference with the Harley-Davidson case (and I’m not familiar with it, but am just relying on Kimstu’s post) is again that the actual business entity is the one who asked for the relief because they were getting their ass kicked competitively. In this case it was a worker’s union who filed for the relief, and it’s actually not in the interests of the tire manufacturers that have already made the capital investment of moving operations overseas. I can definitely see a protective tariff saving a business from being forced out of a market, I can’t see it forcing a business to build new factories in the United States when it is temporary in nature.
However to get back to the Harley-Davidson case, even though the tariff protected Harley I don’t really think it should have, generally speaking sluggish companies that have to go crying to the government to remain competitive probably shouldn’t remain in the market. The market is supposed to push out the weaker players. Of course there is always the chance the foreign players are receiving dramatic government subsidies, which definitely complicates the equation.
As for the anti-Obama bent of the OP, I think it only appropriate as this bad policy is Obama’s. Does anyone seriously think this tariff will work? I don’t think anyone is denying that if the tariff’s rates are high enough they can effectively keep an industry or an individual business in operation over foreign competitors. However, this isn’t a case of an American business being pushed to the edge, but rather a case of American business relocating production and their workers going after them through their union. From a corporate perspective I don’t see how a four year tariff is going to get a major multinational corporation to decide to abandon the extremely expensive factories they built overseas and start up production in the United States again.
Something else to keep in mind is that while China is pretty much unreliable as a participant in fair trade we have won concessions from the Chinese by forcing issues with the WTO. Generally speaking when the WTO rules against China because of its various anti-free market activities it essentially puts the Chinese in the situation of complying or suffering billions upon billions of dollars in lost exports when WTO member states can enact retaliatory tariffs.
By going this route we risk having the Chinese take us into dispute, which we might very well win but that could lead to the Chinese pushing us on all kinds of other trade issues across the board if this has sufficiently soured their leadership.
You have a point about the basic free-market principle of letting competition weed out the weak, and it’s true that giving one of the competitors an unfair advantage complicates things, but I think the crucial issue here is more fundamental. In terms of practical reality, is it really better economically to let established companies go under whenever they’re hit by a sudden major import surge? Are we better off with more factories shutting down and more workers unemployed? Sure, in terms of free-market theory the owners and the workers are all just supposed to move on to something that they can compete at more successfully. But are the entrance and exit barriers to competition low enough to make that practical as a routine occurrence?
Markets thrive on change, but people want stability. The point of economic protection seems to be to increase stability, because instability has a non-trivial economic downside: stretches of unemployment, reduced buying power, missed mortgage payments, and so on.
ISTM that if we’re not going to put a safety net under industries, we have to put it under individuals. If industrial commerce isn’t going to be artificially stabilized, then individual prosperity will have to be, with things like increased unemployment benefits and retraining opportunities, pensions and health care decoupled from employment status, more housing assistance, and so on. People just don’t want to live in the perpetual extreme precariousness demanded by a totally untrammelled market.
Free-market absolutists sometimes disparage workers’ natural desire for job security and prosperity as some kind of selfish obstructionism, as though everybody ought to recognize that market efficiency is more important than whether or not a bunch of what Alex_Dubinsky disdainfully calls “low wage lever pullers” get put out on the street. Sure, maybe in the long run a maximally free market produces the best results all around, but in the long run we’re all dead. How should we handle the consequences of market instability in the meantime? I think if we’re going to say that we totally renounce economic protectionism of all kinds, we have to accompany that with a viable alternative that will supply the economic “shock absorption” that protectionism was intended for.
How should we define “working”? What is the goal for the American tire industry in this particular case? You make a good point that a short-term tariff isn’t likely to change long-term business strategies, but is that really the object here?
As I noted above, it seems this is being treated as a sort of “showdown moment” with China, a watershed decision that is meant to assuage hostility towards market liberalization by demonstrating that even if we trade freely with China we’re not just China’s bitch. As the Manufacturing and Technology News article that I linked to before asserts,
But it’s going to be on this issue that, with regard to trading relations with China, the rubber meets the road.
If a trade war erupts, just exactly what does The US sell to China that is in jeopardy ?
Furthermore, can you list a few of these retaliatory economic levers ?
“What is the goal of the American tire industry?” You should be asking what is the goal of the United Steelworkers, they are the ones who pushed for this, not the tire industry. The goal of the tire industry is to compete successfully–which is why many American tire manufacturers have already moved manufacturing jobs overseas. Their goal is to keep doing what they have been doing. I don’t see a temporary tariff changing that, and neither do you. Since the goal of the United Steelworkers is to wave a magic wand to keep manufacturing jobs in the United States (or even, more ludicrously, to bring them back) we can safely surmise there is no chance of that coming about because of this tariff. The tire manufacturing jobs aren’t coming back, and it is a great disservice to the unemployed and the members of the union for their leadership to mislead them into thinking such unrealistic things.
Since Obama’s goals are clearly linked to the goals of the United Steelworkers, I think it safe to say his goals are to “protect jobs.” As I’ve pointed out, this particular tariff has no ability to do that. It actually has a potential to lose jobs as companies that import Chinese tires will see their profits shrink and may have to lay off American employees.
This is a very dissimilar event from trying to shield Harley-Davidson from a rapid influx of imports. That clearly probably saved Harley-Davidson and probably saved jobs at Harley-Davidson. However nothing happens in a vacuum, and it is very likely it probably cost jobs or stopped the creation of jobs somewhere else.
It is sort of how the steel tariffs may have temporarily saved a few jobs but almost certainly cost many more jobs in other industries and lead to a lower rate of job creation in other industries.
I think it goes without saying that individual social safety nets are generally preferable to corporate ones. A single individual working in a factory, who got the job out of High School and was instantly being compensated ~1.5x the national average had no reason to think he was making a bad decision. Over the decades that followed he kept getting paid and most likely assumed things were going well. He isn’t the reason his company is getting pushed out of business and he is someone we should provide a safety net for–however the corporation itself has to be allowed to die. A corporation represents a vast amount of decision making amongst many individuals and generally speaking when a corporation is on the ropes it is because of a combination of operational and strategic failures.
Just as an example, when fuel prices went up dramatically this hurt many major airlines. A few of the smarter airlines (like Southwest) had locked in lower priced futures contracts as a hedge against possible increases in the cost of crude. In that case you should not reward the airlines that lacked the foresight of their competitors.
On the flip side, I do think the government should consider an “industrial safety net” when something totally outside the realm of the market comes in and has a catastrophic impact on the industry. An obvious example would be 9/11, obviously no rational actor would have foreseen such an event or its catastrophic impact on the airline industry.
Harley-Davidson being unprepared to compete with the Japanese doesn’t really seem like the same thing as the airlines being hit unaware by 9/11.
With the tire industry, well, the tire industry isn’t the one who wanted protection. I think the individual workers, if need be, should be provided a safety net on an individual level. The answer to workers who have lost jobs because their company outsourced production isn’t to try and change the decision that has already been made, provide resources for retraining and reeducation.
Although we do provide unemployment benefits and it’s a whole other debate about how far they go and whether they need to go further (one that I’m not particularly interested in as it is a massive tangent.)
You really aren’t aware of the massive amount of export activity from the U.S. to China?
U.S. exports to China have been growing at a rapid pace for two decades. In 1999, the U.S. only exported about 13 billion dollars worth of goods to China. Last year, it exported 71.5 billion. Among the top exports are electrical equipment, power generation equipment, factory automation, aircraft and spacecraft parts, and medical equipment.
In my business meetings, it’s pretty much a mantra that China is our major future market. Many markets in the U.S. are saturated and mature and hard to break into, but China’s markets are exploding and there are infant industries everywhere that give American companies a chance to gain real traction. Trade with China is expected to be one of the big future drivers of American manufacturing.
Sure. Tariffs on American electrical machinery would be a good start. Siemens would just love it if GE had a 35% tariff slapped on its industrial products.
China could decide to keep its currency lower and drive the prices of American imports up.
China could stop buying up American debt. It’s already trying to get other countries to establish a new world currency. If this happens, American debt servicing costs will go up at least a half a percent, costing billions of dollars per year.
There are all kinds of pending trade agreements with China, including agreements to have the Chinese crack down more on patent and copyright violations. The Chinese could decide to walk away from these, or even encourage bootlegging of American DVDs and stealing of American tech as a form of retaliation.
And the list goes on.
Let’s see if I understand this. The next time I buy tires in the US, I have to pay more, and the extra amount I pay goes to support the US government. This is supposed to help me make ends meet and improve my life. Exactly how does that work?
Oh, it’s intended to help the US tire makers. What makes them so special? Are they better than me?
Yes, they’re better than you. Because the people ‘helped’ belong to a powerful union.
This is the same reason you got to pay a share of the 81 billion dollars the auto workers got, whereas if you’re just a plain old employee of a smaller company that goes under, Uncle Sam won’t be coming to help.
It is about jobs. You may have noticed we have lost a few lately. Our financial relationship with China goes both ways. They can not be too hard on us, because we buy billions of dollars of their production. If they got ugly, we could too and they would also be hurt. That would be two losers. This is just a dance trading partners do. I would be surprised if they were not aware of this problem long in advance.
The jobs are not coming back soon. But as our wages drop, we will get more competitive,that is if we get health insurance out of the cost equation. But this international trade had to wind up with wages dropping across the globe. For a time profits will go way up. But eventually the purchasing power of America will be normalized with the rest of the globe. Then it will be an entirely new game. I won’t tell you what that will be like. You figure it out.
How about slapping tariffs on American poultry and vehicle exports?
Predictable as rain.
That hurts and was a good strategy by China. GM sold almost a 1 million cars to China in August, and its the worlds biggest automobile market.
Any gains Obama made with unions for the tire tariff will be more than offset by the losses in auto worker unions.
I suspect this whole thing is a red herring, to tell the unions that Nobama is “doing something”. The Chinese were probably told: “look, guys, I need a “crisis” to show the US Union bosses that we are doing something. So, we will slap a tariff on your tires; meanwhile, you wil slap a tariff on our chickens. We will have a few staged confronatations, then we will smile and shake hands for the camera. I can show the congress how tough I am, andyou can show your people how you bested the foreign devils.Deal?”
This is how Washington operates, and its not going to change. Plus, lobbyists representing China have been pouring money into the DP, and money trumps principles everytime.