Chinese Tires Case Latest Abuse of the Trade Remedy Laws

Washington’s protectionism lobby – that conspiracy of interests, which includes certain members of the House and Senate, steel and other import-competing producers, organized labor, and creative trade lawyers existentially determined to broaden the definition of unfair trade both statutorily and in the public’s mind – succeeded in extracting rents from President Obama and congressional Republican leadership in the deal that produced Trade Promotion Authority last month.

In addition to reauthorizing Trade Adjustment Assistance, which after 53 years of failure as economic policy has succeeded only at reinforcing the myth that job loss due to trade is especially problematic, Congress passed and the president enacted the American Trade Enforcement Effectiveness Act, which reduces the burden of proof on domestic industries seeking protection from import competition under the U.S. Antidumping and Countervailing Duty laws.

As we at the Cato Institute have documented over the past 16 years in more than a dozen policy papers and a book, the so-called trade remedy laws are already way too accessible and prone to abuse.  The abuse of these laws has caused enormous amounts of collateral damage, especially to downstream U.S. industries whose access to needed raw materials and intermediate goods can be shut down at the request of a single domestic producer.  These laws have never made sense economically, but are especially deleterious in a globalized economy.  Today, these so-called unfair trade laws are used primarily by U.S. companies and their workers to cripple the supply chains of other U.S. companies and their workers.  The rhetoric says “Us versus Them,” but the reality is “Us versus Us” – with net economic welfare losses being the typical result. 

Tomorrow, the U.S. International Trade Commission will render judgment in antidumping and countervailing duty cases involving automobile tires imported from China.  None of the domestic producers supports the petition for duties, which was brought by the United Steelworkers union, representing workers at domestic plants accounting for only 40 percent of U.S. tire production.

The case is not really about unfair trade.  It’s about the union attempting to obtain leverage over management so that it can extract production and wage concessions it might not gain under normal labor-management negotiations.  This is just one of the myriad ways in which the trade laws have been abused in recent years.  With further loosening of the evidentiary thresholds in the new law, we should expect to see more and more cases, and more and more economic damage.

I write about the tires case in greater detail over at Forbes.