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The Tire Problem

Anthony Randazzo
September 2, 2009, 2:15pm

Another trade dispute has opened with China, this time over tires. The argument is emblematic of the same, "tired" trade debate (yeah, I said it) going on for years. Yet, somehow, America still fails to see the full benefits of free trade. Here is the issue:

Between 2004 and 2008, tire imports from China increased 215 percent, while imports from other nations decreased 5 percent and U.S. tire production declined 27 percent.

The wide growth is in violation of the anti-surge provision in Section 421 of the Trade Act.

That kind of statement isn't exactly a "leading" view on free trade. After all, any export has the potential to dislocate American workers on some level. Any activity can dislocate workers if you get down to the nitty gritty. If you totalled up all the time that Congressmen travel overseas for various functions and calculate how much they would have spent on food in the United States, then all the travel is probably displacing a couple Wendy's or Whole Food's workers.

But I digress. In terms of the China trade issue, the leading complainers here aren't actually U.S. tire companies, it is the United Steelworkers union, as a representative for the rubber workers union. They want Congress to use its authority to pass tariffs on Chinese rubber imports to make them more expensive in the US marketplace. Interestingly, an op-ed in the Washington Post notes:

No U.S. tire companies joined the complaint, and it's easy to understand why: Almost all the leading tire manufacturers with major production facilities here -- including Bridgestone, Cooper, Goodyear, Michelin and Pirelli -- also have factories in China. What's more, the Chinese government often requires those factories to export all the tires they make. Cooper has opened two such factories under a government mandate stipulating that every one of their tires be exported for their first five years.

Here is the thing. What makes a company "American" or "Chinese"? Is it where the headquarters are? Is it who the owners are? Where the factories are? Budweiser is made by a company founded in America, by Americans, with headquarters in America, and breweries in America, that happens to be owned by a Dutch company, InBev. Goodyear started in Ohio, founded by a German, that makes its tired in China and sells them back in the US. Globalization has made figuring out "what" a firm is a lot harder and more ambiguous. But why does it matter.

If Americans can buy cheaper tires from a Chinese manufacturer, that are just as good if not better quality than an American manufacturer, then why would we want to charge Americans more? What seems like the real unamerican thing to do is make it more expensive for Americans to buy things. There is nothing ambiguous about that.

Of course, it comes down to jobs. The complaint is that Goodyear, Bridgestone and others aren't employing Americans. But if we are getting a quality product for less, then employing Americans to make a more expensive product would be a waste of resources. And we complain about Wall Street being unwise with its investments. There will always be a need for competition, just not government subsidized competition, which what the proposed tariffs would do. Instead of trying to keep jobs at those plants which aren't needed (which isn't all of them, its not like China has taken over the market), those workers should be used to produce other things that China can't, to innovate, to create.


Anthony Randazzo is Director of Economic Research


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