WASHINGTON—The United Steelworkers union's petition to limit the surging number of Chinese consumer tires imported into the U.S. is the latest example of the domestic tire industry's troubles.
The purpose of the filing with the U.S. International Trade Commission is to combat plant closings and job losses in the U.S. market affected by huge increases in Chinese tire imports during the past five years.
While the case itself and the outcome will generate varied reactions, the players and observers in this drama agree that there are problems in the industry that need to be examined.
The question the ITC—and the Obama administration—eventually will answer is if capping the number of imports from China is a viable solution.
Seeking a quota
In its petition filed April 20, the USW claims the flood of imported tires from China—nearly 46 million consumer tires last year—has led to more than 4,400 job losses and four plant closings in the past five years, plus two more closures and 2,400 job reductions announced in the last four months.
The union said China's consumer tire exports to the U.S. last year—up from 14 million in 2004—were valued at in excess of $1.7 billion. That's $453 million more than in 2004, based on information from the Global Trade Information Services World Trade Atlas. At the same time, domestic consumer tire production fell by more than 25 percent.
The USW is seeking a three-year import quota of 21 million passenger, light truck, minivan and sport-utility vehicle tires annually from China, capping the imports at the 2005 level. Over that period, the quota would rise 5 percent to slightly more than 22 million tires in year two and by 5 percent again in year three to more than 23 million.
The limitation would “improve domestic job security, enable U.S. tire makers to regain lost market share, increase production and sales, and allow investment in capital equipment to better compete in the long term,” the petition says.
The USW is basing its case on Section 421—added in 2000—of the U.S. Trade Act of 1974, which allows U.S. industries and workers to obtain product-specific import relief from sharp increases in imports from China while the country transitions from a non-market economy to a market economy. Section 421, which expires in 2013, was intended to provide expedited consideration of claims, and the USW is counting on the speedy process to help save a “collapsing” domestic tire industry, said union President Leo Gerard.
“It's the strongest 421 case I've seen,” he said. “For America to have a strong future, it needs to have a strong manufacturing economy.”
It's difficult to guess on the outcome of a case like this one, but the petition's claims are what Section 421 was created to respond to, said Stephen Claeys, a former deputy assistant secretary with the Commerce Department under President George W. Bush.
“If they can prove what they allege, they have a case,” Claeys said. But he believes perhaps the more important part of the issue is if the ITC finds the influx of Chinese imports is causing “market disruption,” what does the new administration do?
Under Section 421, the ITC has 60 days to determine if consumer tire imports from China are causing or threatening market disruption to domestic producers, via its six-member commission. If the commission agrees with that position, it can take up to 10 more days to make remedy recommendations to President Barack Obama, who would then have 70 days to decide whether to grant relief.
The process is likely to carry into September.
The Bush administration was criticized in several instances where the ITC made affirmative findings in Section 421 cases, but the president didn't put the program in place, Claeys said. “The current administration can establish a 'tough-on-trade' policy by restricting tire imports” and at the same time distinguish itself from the previous administration, he said.
“The question then is 'How will the decision affect the tire makers and the automotive industry?' ”
The USW wanted to get the consumer tire petition effort off the ground for the past two years, particularly in the wake of shutdowns of U.S. plants by Good-year, Bridgestone Americas and Continental Tire North America Inc. beginning in 2006, according to USW Vice President Tom Conway. But the lack of success on Section 421 issues in other manufacturing segments was a deterrent.
“We think this is the right time to file,” he said. “This market is getting wiped out in a predatory way, and this country needs to come to terms with it. Our hope is that this administration will understand that.”
A new president probably improves the viability of its case in the USW's eyes, Claeys said. But the timing also may be good for the union because it has been able to collect more data over five years to help its cause.
“It takes time to get a case together, and it's easier to make your argument with more information,” Claeys said. “Sometimes petitioners make a mistake and ask for remedy too early.”
While showing long-term trends seems like a positive, sometimes the feeling is that an industry has to be “dying on the operating table before it can get relief,” he said. “That's one big criticism of unfair trade laws.”
Jim Wansley was president of USW Local 746 in Tyler, Texas, where union members manned Goodyear's passenger tire plant before it closed in 2008. He said despite workers at the plant “doing everything right” and striving to be as efficient as possible, the company over time said it was losing a larger portion of the tire market, particularly in 13- to 15-inch sizes.
When the facility finally closed, the entire Tyler community lost millions of dollars a year in taxes, spending and charitable contributions, Wansley said. Goodyear, Bridgestone and Michelin North America Inc. are entering master contract negotiations with the union this summer, and Goodyear has told the USW it can't maintain U.S. capacity as is, he said.
Michelin last month announced the shutdown of its BFGoodrich tire plant in Opelika, Ala., by the end of October. Cooper Tire & Rubber Inc. also announced in December it will close its non-union tire facility in Albany, Ga.
Drawing the line
China is eating its way up the tire food chain, from smaller, less expensive tires to mid-range products to top tier, and someone has to draw the line, Conway said. The country's market share of U.S. tire imports has climbed steadily from 12.9 percent starting in 2004 to 16.9, 21.2, 29.6 and 33.1 percent the last four years.
Imports from other countries—including Japan, South Korea, Mexico and Taiwan—are a concern as well, Conway said, but the import curve among those countries has been relatively flat, no-where close to the upswing achieved by China.
The union said while claims of protectionism might follow a favorable ruling, China agreed to the Section 421 trade remedy as a condition for joining the World Trade organization earlier this decade. If that scenario plays out, the Chinese probably would claim that it would indeed be protectionist, and that in today's global environment, such trade limitation would be unnecessary and wrong, Claeys said.
The U.S. would counter by saying it was just applying what was agreed to, Claeys said. “It's an issue the current administration will have to consider, be aware of and manage.”
The USW in 2007 filed an antidumping and countervailing duty petition—along with farm and construction tire maker Titan International Inc.—claiming certain off-the-road tires from China were being subsidized and dumped in the U.S. Last year the Commerce Department and ITC agreed and determined that duties should be charged.
The union could have filed an antidumping petition in this case as well, Conway said, but it would have been a larger, more time-consuming case. The state of the consumer tire market, with the alarming increase in tires from China and labor negotiations looming, made this trade petition the most effective method, he said.
“This is what Section 421 was designed for, to provide a remedy for products from China flooding our market,” Conway said. “We believe the evidence strongly supports an affirmative outcome as a result of the import surge.”