Almost a year ago, President Obama imposed tariffs on Chinese tire Imports. Between 2004 and 2008, Chinese tires imported to the U.S. at below-market prices increased by more than 300%. The resulting illegal dumping of Chinese tires resulted in the loss of 8,000 tire workers jobs in the United States.
A new study by the Alliance for American Manufacturing has shown that Obama’s enforcement of the trade laws has actually led to an increase in employment and tire production. The study, based on Rubber Manufacturing Association data, shows that U.S. tire factory production has gone up over 15 percent, or by more than 10 million tires. Nearly 500 new workers have been hired in the tire industry and overtime has gone up at Goodyear plants by 20% and at Michelin plants by 15%.
“There is a simple lesson here. Enforcing trade laws works” said Alliance for American Manufacturing Director Scott Paul, in a statement responding to critics who said the tire tariffs wouldn’t help the American economy.
Last year, the United Steelworkers filed a legal case with the International Trade Comission (ITC) under Section 421 calling on the United States government to remedy the situation in accordance with World Trade Organization rules by placing tariffs on the tires. The ITC ruled by a 4-2 vote that the Chinese had created an illegal “market disruption” and recomended tarrifs to remedy the situation. In the decade since the Section 421 law had been in effect, the ITC had ruled seven times that tariffs should be placed on a foreign country to remedy an illegal “market disruption.” On each of those seven occasions, President George W. Bush refused to enforce to enforce the recommendations of the International Trade Commission.
This time, though, Obama decided to invoke the trade law and imposed tariffs on illegally priced tire imports from China. At the time, he was heavily criticized by right wing pundits who said that placing tariffs on China was protectionism and would only result in more American job losses.
Now Alliance for American Manufacturing Director Scott Paul is calling on the administration to enforce U.S. trade laws regarding illegal Chinese currency manipulation. By tampering with the value of the yuan, China is able to effectively create huge, illegal tariffs which make Chinese goods 25-40 percent cheaper than American goods.
The Commerce Department early this week refused to take illegal currency manipulation into consideration when measuring the penalty for the illegal dumping of aluminum. Paul says its now up to Congress to act by passing the Ryan-Murphy currency bill in the House of Representatives and the Schumer-Graham currency bill in the Senate.
According to conservative economist Fred Bergsten, 2-3 millions jobs could be created by fixing China’s exchange rate problem. “If there is going to be a serious jobs program, the exchange rate of the dollar must be at the center of the debate.” C. Fred Bergsten noted this spring in a forum on Chinese currency manipulation.
Taking tough action in Congress about illegal currency manipulation by the Chinese government could not only help the U.S. economy, it could help Democrats in the fall election. Taking on China is a politically popular issue especially with the ultra patrotic Tea Party.
As I wrote back in June for Working ITT, a Mellman Group/Alliance for American Manufacturing poll shows that the top concerns of all Americans, including Tea Party supporters, is not the federal budget deficit but that we are too deep of debt to China in terms of our trade imbalance.
Democrats could divide the Republican base if they brought up a bill labeling China a currency manipulator. “Almost half the Republican caucus would vote for a bill like that,” said Alliance for American Manufacturing director Paul, who knows a thing or two about counting votes on trade issues from his days as trade adviser to House Minority Whip David Bonior.
So Obama and Democratic leaders have plenty of politically options available if they want to pursue sound trade policies to strengthen the economy. The question is: Will Obama and congressional Democrats get tough on Chinese currency the way he did on Chinese tires and potentially save the Democrats in the fall, or will they let the opportunity and the election slip through their fingers?
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