Where the Rubber Meets the Road: What Chinese Tires Mean for Obama's Trade Policy

• Author: Alexis Early
• Position: B.A. Wellesley College 2005, J.D. Washington College of Law 2011
• Pages: 63-74

B u s i n e s s L a w B r i e f | S p r i n g / S u m m e r 2 0 1 0 6 3

I. INTRODUCTION

More than any other leader in recent history, Barack

Obama ascended to the presidency on the momentum

of a nationwide grassroots get-out-the-vote effort.

1

Key to this strategy were thousands of volunteers who knocked

on doors on behalf of labor organizations.

2

To maintain their

support, Obama crafted campaign messages to assuage their

suspicions about free trade.

3

In the Democratic primaries, both

he and then-Senator Hillary Rodham Clinton advocated renego-

tiation of the North American Free Trade Agreement (NAFTA)

and opposition to the proliferation of regional and bilateral free

trade agreements (FTAs) under George W. Bush.

4

Leading up to

the general election, Obama tempered this “amplified and over-

heated” rhetoric, but still took a cautious tack to avoid losing the

strong support of organized labor.

5

Now that he has become President, Obama faces political

pressure from both sides: supporters expect him to maintain his

skepticism of free trade, but the realities of governing the world’s

largest economy require his engagement with and leadership in

the global trade arena. Obama has sought to distance himself

from the Bush administration’s willingness to act bilaterally, out-

side the bounds of the multilateral system; upon entering office,

he expressed an intention to conduct a review of existing trade

laws.

6

His administration released a five-page interim agenda,

but has not yet laid out a comprehensive trade policy and imple-

mentation strategy.

7

In fact, trade is not even listed among the

twenty-three priority issue areas on the White House website.

8

Nonetheless, the economic recession has thrust trade-related

issues to the fore. As domestic industries suffered lost profits,

shrinking market share and large-scale layoffs, organized labor

forces lobbied Congress and the White House to enact “Buy

American” laws and advocated restrictions on foreign imports.

9

In February 2009, Obama signed the $787 American Recovery

and Reinvestment Act, which contains numerous provisions to

generate jobs, encourage green industries and protect traditional

manufacturing sectors like iron and steel via “Buy American”

provisions.

10

However, many of these provisions may violate

WTO agreements enacted to guard against protectionism.

11

According to a March 2009 World Bank report, seventeen of

the G-20 countries – including the United States – have enacted

protectionist barriers to trade as part of their respective economic

stimulus acts.

12

These political and economic factors combined to cre-

ate a perfect storm of discordant pressures surrounding 2007

antidumping (AD) and countervailing duty (CVD) petitions

filed with the International Trade Commission (ITC) by the

United Steel Workers (USW) and American manufacturer Titan

Tire Corporation, accusing Chinese manufacturers of exporting

dumped and subsidized off-the-road tires (OTR tires) to the

U.S. market to the detriment of the domestic industry.

13

The

USW filed these petitions before the onset of the recession, and

the Department of Commerce (Commerce) under President

Bush recommended punitive tariffs two months before Lehman

Brothers filed for bankruptcy in July 2008, which effectively

marked the onset of the financial crisis.

14

The USW’s petition

succeeded because the union could show injury to the domestic

sector, and in 2009 the union proactively filed an additional

“safeguard” petition as working class Americans began to suffer

the consequences of the peaking recession. The USW filed the

safeguard petition against Chinese imports of passenger vehicle

and light truck tires (PVLT tires) under a unique provision

that specifically targets Chinese products. Unlike AD or CVD

actions, American industries are eligible for relief under safeguard

laws without showing evidence of countervailable subsidies or

dumping.

15

Given the lower burden of proof and ability to peti-

tion the government for relief during a recession without alleging

any wrongdoing on China’s behalf, this trade remedy mechanism

raises alarm bells of protectionism.

In light of China’s ascendancy as a global economic power

and its substantial holdings of American debt, the Obama

Where the Rubber Meets the Road: What Chinese

Tires Mean for Obama’s Trade Policy

By: Alexis Early†

Now that he has become President, Obama

faces political pressure from both sides:

supporters expect him to maintain his

skepticism of free trade, but the realities

of governing the world’s largest economy

require his engagement with and leadership

in the global trade arena.