Skip to main content
Menu

Main navigation

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
    LOADING...
  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit
    LOADING...
  • Publications
    • Studies
    • Commentary
    • Books
    • Reviews and Journals
    • Public Filings
    LOADING...
  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
    • Meet the Development Team

Issues

  • Constitution and Law
    • Constitutional Law
    • Criminal Justice
    • Free Speech and Civil Liberties
  • Economics
    • Banking and Finance
    • Monetary Policy
    • Regulation
    • Tax and Budget Policy
  • Politics and Society
    • Education
    • Government and Politics
    • Health Care
    • Poverty and Social Welfare
    • Technology and Privacy
  • International
    • Defense and Foreign Policy
    • Global Freedom
    • Immigration
    • Trade Policy
Live Now

Cato at Liberty


  • Blog Home
  • RSS

Email Signup

Sign up to have blog posts delivered straight to your inbox!

Topics
  • Banking and Finance
  • Constitutional Law
  • Criminal Justice
  • Defense and Foreign Policy
  • Education
  • Free Speech and Civil Liberties
  • Global Freedom
  • Government and Politics
  • Health Care
  • Immigration
  • Monetary Policy
  • Poverty and Social Welfare
  • Regulation
  • Tax and Budget Policy
  • Technology and Privacy
  • Trade Policy
Archives
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • September 2009
  • August 2009
  • July 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • February 2009
  • January 2009
  • December 2008
  • November 2008
  • October 2008
  • September 2008
  • August 2008
  • July 2008
  • June 2008
  • May 2008
  • April 2008
  • March 2008
  • February 2008
  • January 2008
  • December 2007
  • November 2007
  • October 2007
  • September 2007
  • August 2007
  • July 2007
  • June 2007
  • May 2007
  • April 2007
  • March 2007
  • February 2007
  • January 2007
  • December 2006
  • November 2006
  • October 2006
  • September 2006
  • August 2006
  • July 2006
  • June 2006
  • May 2006
  • April 2006
  • Show More
June 18, 2009 4:59PM

High Noon for U.S. Trade Policy

By Daniel J. Ikenson

SHARE

This morning, the U.S. International Trade Commission issued an affirmative determination in a so‐​called “Section 421″ or “China‐​Specific Safeguard” case that imports of consumer tires from China are causing market disruption in the United States. That may sound like just another day in Washington, but the decision could very well be the catalyst for the most consequential event in trade policy since the Bush steel tariffs of 2002. It will certainly force a defining moment for a president who has preferred obfuscation to clear direction on trade policy.


Under the statute (which became U.S. law as a condition of China’s accession to the World Trade Organization in 2001), the ITC has 20 days to provide remedial recommendations to the president and the U.S. trade representative. Those recommendations are likely to include quotas, tariffs, or some combination that will ultimately curtail the supply and raise the prices of all tires in the United States — not just those imported from China. However, the president has the discretion to deny import “relief” if he determines that such restrictions would have an adverse impact on the U.S. economy that is clearly greater than its benefits, or if he determines that such relief would cause serious harm to the national security of the United States.


I will forego my own explanation as to why restrictions would have an adverse impact that is clearly greater than its benefits, and instead give you the statement of the U.S. Tire Industry Association, which represents “all segments of the tire industry, including those that manufacture, repair, recycle, sell, service or use new or retreaded tires, and also those suppliers or individuals who furnish equipment, material or services to the industry.” Suffice it to say that no producers of tires in the United States supported this petition, so it is not a matter of U.S. tire producers against Chinese tire producers. It is really nothing more than a matter of a U.S. union objecting to management’s decision to produce its lowest grade (lowest quality, lowest priced, lowest profit margin) tires abroad. Yet the consequences of trade restraints could affect interests across and throughout the economy, particularly if China responds in kind.


During the Bush administration, there were six Section 421 cases filed by domestic parties, four of which were found by the ITC to warrant import relief. In each of those four cases, President Bush exercised his discretion to deny relief. The tires case is a test case for President Obama. Will 421 fly under this president? Or will it remain the dead letter that petitioners considered it to be under President Bush?


The stakes are much higher for Obama than they were for Bush because the unions (the United Steel Workers union is the petitioner in the tires case) and the Chinese both feel more emboldened in their positions now. Bush didn’t win the near‐​unanimous support of organized labor in his elections, nor did he promise to get tough on Chinese trade practices, as Obama did.


Instead, Bush set the precedent of denying relief. And he did it four times. So, the Chinese see this firmly as a matter of presidential discretion — unlike antidumping or countervailing duties, which run on statutory auto pilot without requiring the president’s attention or consent. In other words, although there are over 50 outstanding U.S. antidumping and countervailing duty orders against various Chinese products, none of them is considered to reflect the direct wishes of the U.S. president, and thus don’t rise to the level of a potentially explosive trade dispute. But trade restraints under the 421 will no doubt be considered by the Chinese to be a directive of the U.S. president, thus the offense taken and the consequences wrought could be profound.


The good news is that President Obama will finally be forced to take a stand — to match his words and deeds. After a campaign in which trade was disparaged, President Obama’s first 100 days were characterized by a conciliatory tone and some enlightened actions. He told the Mexican president and the Canadian prime minister that he no longer wanted to reopen NAFTA. He spoke out against the most protectionist provisions of the Buy American language in the so‐​called stimulus bill. He repudiated protectionism and pledged to avoid new protectionist measures at the G-20 and before other international gatherings. His Treasury Department declined to label China a currency manipulator. And his trade representative set about articulating a pro‐​trade agenda, including support for a push to pass pending bilateral trade agreements and concluding the Doha Round.


But there’s been very little follow through and trade partners are beginning to doubt his sincerity. Efforts to schedule votes on pending trade agreements have been shunted aside as too controversial to happen before health care reform legislation. In the meantime, imports are being turned away from U.S. procurement projects on account of some mindless Buy American caveats and overzealous interpretation of other Buy American rules by project administrators, which is inciting copycat rules in Canada and China.


The time has come for the president to stop wavering and to take decisive actions on trade policy. Of course, he will have until September 17 to render his decision about whether to grant or deny relief in the tires case. Between now and then he should conclude that trade restrictions are not the appropriate course — that among other problems, they will also undermine his economic and diplomatic objectives. And while he’s denying relief, he should take some advice from Scott Lincicome and me to speak the truth about trade to those constituencies who will feel betrayed. Directly and honestly making the case for trade to those who doubt is more durable than rationalizing each pro‐​trade decision, which has been the norm for too long in Washington. Besides, the polls show that Americans have already turned the corner and are moving away from their misguided flirtation with protectionism. That may help inspire an uncommitted president to take the baton.

Related Tags
Trade Policy, Herbert A. Stiefel Center for Trade Policy Studies

Stay Connected to Cato

Sign up for the newsletter to receive periodic updates on Cato research, events, and publications.

View All Newsletters

1000 Massachusetts Ave. NW
Washington, DC 20001-5403
202-842-0200
Contact Us
Privacy

Footer 1

  • About
    • Annual Reports
    • Leadership
    • Jobs
    • Student Programs
    • Media Information
    • Store
    • Contact
  • Podcasts

Footer 2

  • Experts
    • Policy Scholars
    • Adjunct Scholars
    • Fellows
  • Events
    • Upcoming
    • Past
    • Event FAQs
    • Sphere Summit

Footer 3

  • Publications
    • Books
    • Cato Journal
    • Regulation
    • Cato Policy Report
    • Cato Supreme Court Review
    • Cato’s Letter
    • Human Freedom Index
    • Economic Freedom of the World
    • Cato Handbook for Policymakers

Footer 4

  • Blog
  • Donate
    • Sponsorship Benefits
    • Ways to Give
    • Planned Giving
Also from Cato Institute:
Libertarianism.org
|
Humanprogress.org
|
Downsizinggovernment.org