President Evokes Trade Remedies In Tire Case

In a case that has been followed closely by US textile manufacturers, President Obama has decided
to impose additional tariffs of up to 35 percent on imports of tires from China. While the case
will directly benefit manufacturers of tire cord, textile industry officials are heartened by what
they see as a possibility of using the same procedure to get relief from other imports of textiles
that they believe are disrupting the market.

The three-year remedies impose an additional tariff of 35 percent on top of the current 4
percent the first year, 30 percent the second year and 25 percent in the third year. The action
follows a determination by the US International Trade Commission that a harmful surge of Chinese
tires disrupted the US market.

Reacting to the decision, US Trade Representative Ron Kirk said: “When China came to the
World Trade Organization (WTO), the [United States] negotiated the ability to impose remedies in
situations just like this one. The Administration is doing what is necessary to enforce trade
agreements on behalf of American workers and manufacturers. Enforcing trade laws is key to
maintaining an open and free trading system.”

The action was taken under Section 421 of the 1974 Trade Act that provides for remedies when
market disruption is determined. Textile manufacturers maintain that illegally subsidized Chinese
imports are disrupting a number of markets, and they see Section 421 as the easiest, least costly
and most direct route to get relief.

US textile manufacturers welcomed the decision, importers of textiles and apparel blasted it,
and the Chinese government threatened retaliation.

Calling the decision “good news,” Cass Johnson, president of the National Council of Textile
Organizations, said it demonstrates that Section 421 cases are a “viable option” to address trade
problems. He said government data show that where textiles are concerned, there is market
disruption, job losses and plant closings resulting from import surges, pretty much the same
criteria that were used in the tire case.

Lloyd Wood, a spokesman for the American Manufacturing Trade Action Coalition, which includes
textile manufacturers, said that while the decision is a good thing, it is only a short-term remedy
and the US government must undertake a more comprehensive approach to attacking illegally
subsidized trade that he says has created a cumulative $3.8 trillion trade deficit since 2001.

US importers of textiles and apparel sharply attacked the decision saying it creates a
“dangerous precedent that opens the door to more protectionism.” Laura Jones, executive director of
the United States Association of Importers of Textiles and Apparel, said: “With the President’s
decision on tires, we have to expect that other groups will now try to use their political clout to
decide US trade policy.” She claimed that restrictions on imports of Chinese clothing would not
return any jobs to the United States but would result in increased costs of clothing at a time when
consumers already are wary of spending and retailers are hurting.

Kevin Burke, president and CEO of the American Apparel and Footwear Association, also
expressed his concern that the action taken in the tire case could lead to petitions covering
clothing imports. He said, “We are confident that a petition would not factually substantiate the
need for tariffs on clothing.” He said, however, that “we are concerned that the affirmative
decision on tires raises political expectations that additional protectionist measures could be
easily granted, which could lead to an international trade war and jeopardize our economic

The Chinese government immediately threatened to retaliate against US exports of poultry and
auto parts, and possibly to appeal the decision at the WTO. China’s Minister of Trade said the
decision is “a grave act of protectionism” that not only violates WTO rules but also runs counter
to a pledge made by the US government at an economic summit last April not to engage in any
protectionist practices.

September 15, 2009