tires

Another Hoover on trade?

by Fran Smith on September 15, 2009 · 1 comment

in Economy, International, Trade

President Obama’s slapping of tariffs on tires imported from China is the latest in a series of protectionist moves by the U.S. that threaten the world trading system, risk retaliation by the U.S.’s largest foreign creditor, and ultimately harm consumers.  A Wall Street Journal editorial today titled “A Protectionist President” points out that Obama’s trade stance could be following in the disastrous footsteps of President Hoover.

The reality is that without the U.S. leading by example, the world trading order is likely to deteriorate into every country for itself. This is especially dangerous amid a global recession in which world merchandise trade volume fell by roughly 33% from the second quarter of 2008 to June 2009. Reviving trade flows is crucial to restoring global growth.

Mr. Obama may not intend to start a trade war, but then Hoover didn’t set out to pick one either. His political abdication is what made it possible, however, and trade passions once unleashed can be impossible to control. On his present course, President Obama is giving the world every reason to conclude he is a protectionist.

The Chinese have said they may retaliate on the tire tariffs by restrictions on U.S. chicken and auto parts.  That indeed could escalate to the detriment of U.S. manufacturers and producers and the jobs they maintain.  But U.S. consumers, especially lower-income consumers, could face immediate and substantial increases on lower-cost tires, many of which come from China.  Some tire distributors estimate that the cost of a $50 tire could rise to $85.  Since U.S. manufacturers mainly produce higher-priced tires, this protectionist move will do virtually nothing  for U.S. jobs in the tire industry, except perhaps appease the trade unions, especially the United Steelworkers, which have been clamoring for more protection.

Regulation of the Day 50: Tires from China

by Ryan Young on September 14, 2009

in Economy, Mobility, Regulation, Regulation of the Day, Trade

Consumers have been buying a lot of tires made in China lately. Naturally, U.S.-based tire manufacturers are upset at their competitors’ success. Fortunately, there are two ways for the aggrieved American firms to ease their troubled minds:

1: Make better tires for less money. Give consumers a reason to buy American tires rather than Chinese. Compete, in other words.

2: Don’t compete. Too much hard work. Instead, persuade some politicians to place a 35 percent protective tariff on competitors’ tires. Price them out of the market. Then keep making the same old tires that people don’t want. If the tariff is large enough, you may even be able to raise your prices, even without raising quality.

This is a choice between raising the bar and lowering it. Unfortunately, U.S. tire firms and allied politicians have chosen to lower it. China, by putting up its own barriers to retaliate, is lowering the bar even further.

The really audacious part is that tire tariff supporters think they are really helping the economy. Raising that bar. Saving American jobs!

There is something very unsettling about the notion that an American job is intrinsically more valuable than a Chinese job. We are all human beings, are we not?

This is an ugly, ugly mindset. And it is one that politicians and tire companies have explicitly adopted. The burden is on them to explain why they think people who live in one country are more deserving of economic opportunity than people who live in another.