By on September 12, 2009

President Obama paid his outstanding union dues and slapped a 35 percent punitive tariff on Chinese car and light truck tires exported to the USA. The new duty will take effect on September 26 and comes in addition to an existing 4 percent duty, Reuters reports. Everybody, except for the United Steelworkers, agrees that this is one of the most boneheaded decisions of the new administration.

No American tire manufacturer supported the case. Cooper Tire even publicly opposed it. No wonder: US tire companies are the biggest offenders (in the eyes of the United Steelworkers), having moved most if not all of their budget segment tire production to low labor cost overseas sites. Chinese tires are not in the USA because China wants to rape and pillage the market. Chinese tires are here, because US tire companies set up joint ventures in China to make what the market demands: Tires for less.

China is not the only exporter of budget tires to the USA. According to the Wall Street Journal, 43 percent of the tires sold in the USA are imported. Only 11 percent are imported from China. The far larger share is imported from low labor cost countries such as Malaysia, India, or Central Europe. What the boneheaded decision does is simply shift tire production from China to other low cost producing countries. These countries can take advantage of 11 percent of the tires effectively removed from the US market. The low cost producers can raise their prices until the market settles. The American consumer will bear the cost. Not a single new job is created in US tire companies. Jobs will be lost at tire distributors and dealers. This decision achieves nothing for America except higher prices and troubles with China.

The American Consuming Industries Trade Action Coalition wrote in a letter to the US Trade Representative John Kirk: “The absence of tires from China in the market will raise costs to downstream consuming industries, including automobile manufacturers, will limit consumer choices and affect most seriously those with the fewest resources. Thus, these tariffs will be the most regressive of taxes.”

“Those with the fewest resources” (i.e., the poor) are easiest sold on buying the import-restriction Kool-Aid. They drink it in big gulps: Imports bad for jobs. When they find out that fewer low cost imports mean higher prices, that they still have no jobs, and that their welfare check buys much less, then it’s too late.

The complaint by the US Steelworkers does not allege unfair trade practices. No longer needed. In US law, there is a special anti-China provision, called section 421. The Hong Kong Trade Development Council explains the complicated law in the most succinct way: “Under Section 421, the USITC determines whether a specific product from the mainland is being imported into the U.S. in such increased quantities, or under such conditions, as to cause or threaten to cause market disruption. ‘Market disruption’ is defined as rapidly increasing imports, either absolutely or relatively, so as to cause or threaten to cause material injury to a U.S. domestic industry. If the USITC makes an affirmative determination it proposes a remedy, which the president may or may not implement.”

The USITC is the United States International Trade Commission, “an independent, quasi-judicial federal agency that provides trade policy advice to both the legislative and executive branches of government.” The USITC is often called the International Trade Commission to give it a fake supranational flair. It’s pure US government.

“Market disruption” is a vague concept. If anyone feels disrupted by Chinese imports, they can petition the USITC. If the USITC accepts it and takes it to the president, and if he signs it, no more Chinese imports. Under Bush, for all his failings, every section 421 petition that reached his desk was rejected: He had to decide on strategically important goods such as wire hangers, steel pipe, brake drums and rotors and “pedestal actuators,” a component used in scooters for the disabled. All voted down.

Obama approved the first 421 petition that was put before him. China and US companies are rightly afraid that this will trigger a flurry of section 421 cases. “Multinational companies such as Caterpillar Inc., Citigroup Inc. and Microsoft Corp. have urged Obama to refrain from curbing imports, saying it could lead to a “downward protectionist spiral,” writes Bloomberg.

The United Steelworkers based their complaint on the allegation that Chinese tires had cost a paltry 5,000 union jobs over a number of years. Which of course is bunk. The jobs were lost because US consumers increasingly refuse to buy the high priced tires, and because US tire companies have reacted to consumer demand and moved their production elsewhere. Only one fourth of the tire imports comes from China.

Understandably, the Chinese are deeply upset. China’s state-run news agency, Xinhua, writes, “This ruling came at a time when the U.S. economy is at an uncertain turning point from the worst recession since World War II.” Officially, China exercises restraint. “Observers said that the president needs his people to help make domestic reform smoother,” is as low as Xinhua wants to publicly stoop.

The verbiage from China’s Ministry of Commerce is stronger: “China expressed strong dissatisfaction and is resolutely opposed to this,” said China’s Ministry of Commerce (MOC) spokesman Yao Jian. “This does not comply with WTO agreements on subsidies. The U.S. used an incorrect method to define and calculate the subsidies, which has resulted in an artificially high subsidy rate, hurting Chinese firms’ interests.”

What China is likely to do is threefold:

One, China will drag the USA in front of the WTO. China will have the tacit or open support from other low-cost countries, including the EU (many low cost countries, such as Poland or Romania are EU members.) The world will also love to slap around a country that demanded free trade as long as free trade was good for America. Note that China mentioned “subsidies.” The bail-outs will come on the table also. WTO proceedings can drag on forever.

Two, China will take some tit-for-tat measures. On the table is a hefty tariff on US auto imports to China. During the first half of the year, China imported more than $1 billion worth of automobiles from the US. China could buy fewer Boeings and more Airbusses. If things get really bad, China could put a dent in the Chinese growth of the automotive ward of the state, GM. Europe will love it all.

Three, Chinese President Hu Jintao will give Obama a tongue-lashing when they meet in Pittsburgh at the G-20 Summit September 24-25. Obama will be gently or not so gently reminded that America’s largest creditor deserves a little better treatment, or the money could be moved elsewhere. Timothy Geithner will also be reminded that his announcement in June that “Chinese assets are very safe” is bunk. The greenback is on its way down. A EURO bought $1.46 today and it’s heading toward $1.50. Come to think of it, a falling dollar is the best protection against cheap imports from all corners of the world: The lower the dollar, the more expensive the imports. A truly free market needs no section 421.

Forbes writes: “The current round of disputes will undoubtedly end up in a trade war, and China, a country extraordinarily dependent on exports, will surely be the biggest loser.”

Don’t bet on it.

America is already involved in two shooting wars which it couldn’t afford would China not buy its bonds. America cannot afford two shooting wars and a trade war with its largest creditor.

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76 Comments on “Editorial: Trade War Watch 1: Yes, We Can Start a Trade War...”


  • avatar
    Billy Bobb 2

    That’ll teach ‘em not to scrimp on the gum strips!

  • avatar
    Zarba

    Excellent analysis.

    Wer’re uunfortunately about to find out the consequences of moving from the world’s largest creditor nation to the world’s largest debtor nation.

    The wholesale destruction, over the last 30 years, of the American economy by successive governments, both Republican and Democrat, will go down as the tipping point of American wealth, power, and influence. We have whored ourselves out to finance a government we cannot afford.

  • avatar
    niky

    Protectionism is bad for who?

    So it’s okay to enact protectionist policies if America’s economy is in the doldrums, but when it’s master of the world, the rest of us are being obstructive and unfair? Do tell, now….

    +1 on the excellent analysis… I wonder how the Chinese government will retaliate…

  • avatar
    Adub

    Great analysis. I likewise agree that this will hurt us more than them. And war is war, no matter how you want to phrase it.

    China could go nuclear dump the dollar en masse. Sure, it would hurt their economy, but it would annihilate ours. We’d be knocked out without them firing a (real) shot. And their pro-growth policies would help them climb out of a depression faster than us or Europe.

    This push by the steel workers union reminds me bitter divorcees: They don’t want to make anybody’s life better, they just want you to hurt.

  • avatar
    johnthacker

    Another industry that’s been rumored for retaliation is farming. China imports a lot of chicken and pork from the US. But cars are an obvious one, which is why the auto industry was really against this decision.

  • avatar
    John Horner

    The massive trade imbalance between the US and the rest of the world is not sustainable. Beat the free markets drum as loudly as you want, but at some point a nation has to stop importing vastly more than it exports. China has more to loose in a trade war with the US than the US does.

  • avatar
    John Horner

    “Under Bush, for all his failings, every section 421 petition that reached his desk was rejected: He had to decide on strategically important goods such as wire hangers, steel pipe, brake drums and rotors and “pedestal actuators,” a component used in scooters for the disabled. All voted down.”

    True enough, Bush was always for drop-our-pants trade policies. Unless, of course, there were political points to be made with neo-cons. Cuba’s regime is no more brutal and totalitarian than is China’s, yet absolutely no trade with Cuba is allowed.

  • avatar
    John Horner

    “America is already involved in two shooting wars which it couldn’t afford would China not buy its bonds.”

    Great, lets stop those shooting wars then.

  • avatar
    mtypex

    This is gonna get nasty. When I was in grad school, I studied trade wars, and this is going to be the mother of all economic warfare scenarios.

  • avatar
    twotone

    Scapegoats are always easy to find in troubled times. A knee-jerk reaction to band aid the symptoms is simpler than trying to cure the underlying problem. Lets add everything else Walmart sells to the tire list. “Made in China” has very little meaning these days of world-wide contract manufacturing. Cooper tires or Mattel toys are just two examples.

    Twotone

  • avatar
    mpresley

    This is what happens when a nation forsakes it’s economic sovereignty for short term consumer gain. Short of initiating policies that will discourage government spending, encourage a strong dollar, limit all illegal and all non-productive legal Third World immigration, encourage individual savings (savings that can be channeled into productive investments), and so forth, the US is destined to become a Second or Third rate economy.

    Unfortunately, it doesn’t appear that either major party is willing to do what is necessary, and as the US population becomes more and more Third World, and as the national IQ drops commensurately, political will becomes even less likely to manifest.

  • avatar
    Matt51

    The Fed just bailed out the banks to the tune of 10-12 Trillion dollars. China dumping one Trillion is pocket change. However, cars cost too much for the average American, whether Japanese, American, or European.
    Hopefully this tariff on tires is reversed, and is not a precursor of banning Chinese cars. Allowing Chinese cars into the market, would be beneficial to more Americans than it hurts. US should not be afraid of a trade war with China, but we have to make up our minds, do we allow totally free trade, or do we protect certain favored industries?
    How do we decide to not slap a tariff on products from Japan or Korea, but those from China?

  • avatar
    mpresley

    Matt51 : The Fed just bailed out the banks to the tune of 10-12 Trillion dollars. China dumping one Trillion is pocket change.

    Think about this for a minute. First, the sums you cite are in no way “pocket change.” Trivializing the situation does no one any good.

    Secondly, if China (and possibly Japan) do not see fit to buy our debt, what do you suppose is going to happen, next? The funds will either be: 1) appropriated via taxation (there is probably not enough income to tax given the amounts we are talking about), or 2) simply printed (the Fed “buys” treasury notes). Either way, things do not look too good.

    There is nothing wrong with boosting our national manufacturing position, but we must have a coordinated monetary/fiscal policy that supports real economic growth. This is something we have not had for many many years. Lest I’m accused of being anti-Obama (which I am), I will be the first one to blame Republicans, too.

  • avatar
    Autosavant

    “Everybody, except for the United Steelworkers, agrees that this is one of the most boneheaded decisions of the new administration.”

    If you have any background in International Econs 101, you’d know the above is true. Protectionism is bad for every nation it practives it, its trading partners AND the world as a whole. It SHRINKS THE ECON PIE, and everybody loses in the long run.

    And this is a hard record to top, in an administration that is auto illiterate…and still sticks its nose in the Auto industry with disastrous results on a daily basis.

  • avatar
    gslippy

    This has nothing to do with tires or steel or money.

    Obama is simply trying to buy votes with the USW, which is foolish because he already has them. He cares nothing about the economic consequences of the tariff; it’s purely a political move, just like the bailouts or health care or tax policy. And yes, Bush initiated the first bailouts – shame on him, too.

    To Obama, the results really aren’t important, just the appearance of caring for your constituency, almost like a giant Ponzi scheme.

  • avatar
    Matt51

    mpresley-
    We have no reason to fear China, and we need to put the amount of debt China holds in perspective. So yes, people need to stop running around like Chicken Little saying the sky will fall if China dumps the dollar. China would have more to lose in a trade war than the US.
    No, if China and Japan do not buy our debt, we will buy our goods from other countries, or make more goods here. They have to do something with the dollars they earn.
    I voted for Obama, but we have to be careful in how we approach trade, and we need to treat trading partners fairly.
    Free trade says trade deficits should not exist in the long term, because currencies should adjust (they adjust, but not nearly enough). This part of the free trade equation is missing, and has damaged American employment.
    The single best thing we could do to help American companies, and the jobs they create, is to create a level playing field on health care. Cover everyone under Medicare, and shift the cost burden from employers to the tax payer. This would immensely benefit American companies.

  • avatar
    psarhjinian

    Under Bush, for all his failings, every section 421 petition that reached his desk was rejected

    True, but he did try to slap tariffs on steel and did do so on softwood lumber. Oh, and there’s that whole “Cuba” thing.

    I’m not completely against tariffs. I think a carte-blanche green or human-rights surcharge, especially against export-based economies, might not be a bad thing. Doing it willy-nilly based on political whims is a bad thing, however, especially since it’s very hard to defend on the international stage.

  • avatar
    OldandSlow

    After all of the livestock has left the barn, – now – is the time we decide to close the doors.

    The US consumer has been stuck in a Discount-Mart mindset for a good twenty years. Auto execs have chiseled down the price of tires that they buy for new cars and trucks, as well.

    It’s been one continuous economic journey downward for US manufacturing, step by step. So, I wasn’t surprised when listening to the BBC that an overseas commentator stated that the only growth he sees in US manufacturing “is the printing of money.”

    How about you all? Are those $70 tires or $110 tires on your passenger car? Did you even check the country of origin?

  • avatar
    Autosavant

    “OldandSlow :
    September 12th, 2009 at 11:34 am

    After all of the livestock has left the barn, – now – is the time we decide to close the doors.”

    I will TRY to explain basic Intl Econs to you, but I have little hope that you will understand.

    I then will try to make it really simple.

    Why don’t you extend your disastrous suggestion above?

    Why not just erect a wall around the US?

    Why not erect another wall around your prosperous state (eg, CT) so you do not trade with MS and all these other poor states?

    AND WHY stop there? If you live in a wealthy town, why not erect a stupid wall around that town so you cannot trade with the poor towns around you?

    At the end, you will live as miserably as these poor Germans and Slavs in Dueppel, a village outside Berlin, in 1,200 AD (NOT BC!!!), who were pitifully protectionist by necessity (isolated, no goood roads etc) and it took them 40 HOURS to make one dress (and it wasn’t a Prada either! It was a stupid SACK!)

    Good luck….

    PS it makes NO Sense to compete in industries where every unskilled 4th world worker can do your job. TRAIN AND EDUCATE yourself and get a MUCH BETTER job, if you are laid off from 19th and 20th century manufacturing plants!

  • avatar
    Autosavant

    PS WALMART has tremendously increased the standard of living of the POOREST of Americans and made them able to afford all the things they could not even dream of owning a few decades ago.

    It is estimated WALMART saves the US CONSUMER, especially the BELOW-Averagwe US consumer, $10,000,000,000.00 a YEAR. Why is this so terrible?

    The KENNEDYS and their liberal millionaire friends will NOT miss it, if protectionist econ illiterates close down Walmart, you csan be sure they never need to shop there! but the below-average JOE SURE WILL!

  • avatar
    texmln

    The single best thing we could do to help American companies, and the jobs they create, is to create a level playing field on health care. Cover everyone under Medicare, and shift the cost burden from employers to the tax payer.

    I ALMOST hope this actually happens just to prove what a stupid idea it is. Unfortunately, if it does happen it will mark the point of no return for not only your good health, but the U.S. economy in general. Destroying the best health care system in the world – that successfully serves 280 million people – to buy the votes of the 20 million or actual CITIZENS who lack insurance will have such negative ramifications they can’t even begin to be described. If losing GM would have been such a blow to the economy we couldn’t let it happen, just wait until you take away all economic incentive for private companies and individuals to participate in the health care industry.

    The problem is that most of you have zero experience with ‘free’ health care like the UK’s NHS. I assure you, if you did, you would have already taken up arms against this idiotic ‘health care reform’ plan. You have absolutely no idea of the horror that awaits you.

  • avatar

    @John Horner
    True enough, Bush was always for drop-our-pants trade policies. Unless, of course, there were political points to be made with neo-cons. Cuba’s regime is no more brutal and totalitarian than is China’s, yet absolutely no trade with Cuba is allowed.

    The Democratic Senator of my state (Washington) says you’re wrong:
    From 2002:
    ““Cuba is an emerging market for Washington state agricultural trade, particularly in peas, lentils, wheat, apples, but also several other commodities grown by our farmers,” Cantwell said. “I will use this opportunity to advance the importation of Washington state products.”

    That said I agree that choking trade with Cuba is just plain dumb but that predates Dubya by 30+ years.

  • avatar
    Autosavant

    “Destroying the best health care system in the world – that successfully serves 280 million people -”

    US population is 310 million, and will be 400 million in 30 years, not counting the illegals. But besides this:

    Evcery administration in the last 30 or so years is guilty of doing NOTHING to stem the crazed, unbelievable, growth in health care costs, and I do NOT mean the expensaive treatments and the high salaries for some physicians, BUT THE utterly out of control cost of hospital supplies and every little ordinary item that you can still buy for 50 CENTS at Riteaid (like a piece of cotton), WHILE you are charged $20 for the SAME little piece of cotton if the hospital buys it for you!

  • avatar
    derm81

    TRAIN AND EDUCATE yourself and get a MUCH BETTER job, if you are laid off from 19th and 20th century manufacturing plants!

    Easier said than done. Training isn’t free….someone is paying for it. Also keep in mind that once training is completed, a person needs to get into his or her field almost right away. With the job market the way it is today, many may lose the skills they learned in training and or school.

  • avatar
    Gardiner Westbound

    Speak softly and carry a big stick. – Theodore Roosevelt, 1903

    China isn’t the only country that is pissed at America flaunting international trade rules. Canada has repeatedly told Washington its illegal tariff and non-tariff trade barriers, including arbitrary border disruptions, are damaging to North American trade relations.

    Last week the Obama administration was officially shocked and dismayed Canada will allow PetroChina to take over two planned Alberta oil projects. There is also talk of a pipeline to Kitimat to export natural gas to China.

    The U.S. is now on notice that other countries are thirsty for the Canadian oil and natural gas that sustains America. There might not be enough to go around!

  • avatar
    Juniper

    Obviously a complex situation, and one you are personally affected by. However, were those tires designed with licensed Pro E software or pirated software how about the CNC software that makes the molds or the design of the CNC machines. When you can’t walk down to almost any corner and buy pirated products, let me know. China has the clout but they are the biggest thieves and liars in the game. My short sited reaction is F em.

  • avatar
    Autosavant

    “Easier said than done. Training isn’t free….someone is paying for it.”

    Of course it is not easy, and not just because of the cost, but also its difficulty.

    The one who should pay for it should be the trainee himself or herself, and his immediate family; NOT the long-suffering US taxpayer.

    ANd if one can pay for it, I have seen statistics that show both that

    1. The higher the level of your education, the better your pay, and

    2. The higher that level, the lower the unemployment rate in your group. The stats are very striking here, high school diploma holders have almost 4 TIMES the unemployment rate of those with professional degrees or PhdS, and the rate decreases steadily as you go from HS to College to MS to Prof and Phd levels.

    Tuition could be very expensive, but given the above, it is really a good investment, and one more reason nobody else should be paying for it but the student himself.

    We have seen a huge increase in the no. of graduate students at our U. Grad classes that used to have 4 and 8 students now have 25! I’m sure the recession had something to do with it.

  • avatar
    ruckover

    “Destroying the best health care system in the world – that successfully serves 280 million people – to buy the votes of the 20 million or actual CITIZENS who lack insurance will have such negative ramifications they can’t even begin to be described . . . . The problem is that most of you have zero experience with ‘free’ health care like the UK’s NHS. I assure you, if you did, you would have already taken up arms against this idiotic ‘health care reform’ plan. You have absolutely no idea of the horror that awaits you.”

    Unless you are one of the 45 million, not 20 million, people with no insurance, then it sounds pretty good. Or one of the under-insured who are wiped out by one serious illness. Or one of those who pays for insurance but is denied coverage by their insurance company.

    It is the best, if you are lucky enough to have great insurance. It sucks if you don’t. I have been on both sides. I know the horror that our system can cause.

  • avatar
    King Bojack

    If universal health care is so shitty why do other countries, democratic ones at that keep it going? Answer me that any dipshit who thinks US health care is anywhere near good.

    To address trade with China, we need our dealer way more then they need our junkie ass. Anyone who thinks that we haven’t sold our asses to China is a fool. Sure the numbers make us look economically better but now we have to suck so much Chinese gov’t chode to maintain our flood of credit and cheap shit it’s sadening. Nothing against regular Chinese people since I’m sure they’re all nice and everything.

    To address Walmart, sure they can sell you a 30 dollar dvd player. Too bad they might have your job taken away making that 30 dollars too much. On the other hand they will give you one of the shittiest jobs in America to earn enough money to buy said dvd player. Walmart has costed the country dearly in terms that cannot be measured economically by selling out our independence (something prior generations DIED for) so some trailer park shitball can afford another needless Miley Cyruss dvd for her drop out daughter. One can enjoy a very high standard of living and never set foot in a Walmart.

  • avatar
    Autosavant

    “Unless you are one of the 45 million, not 20 million, people with no insurance, then it sounds pretty good.”

    The devil is in the details, and the details paint a VERY different picture, most of the above are not sick elderly that need care but YOUNG people in perefect health that are unwilling to subsidize everybody else by participating and paying monthly dues they can hardly afford.

    I have been fairly healthy over the last 30 years and have3 always opted for one of the several (12 or so) available plans from my employer that did not have a monthly payment by myself (the employer paid the whole thing), but it also had lighter coverage for many conditions than more luxurious plans. Even that plan went eventually bankrupt, and shortly before it did, (and then was bought by BC-BShield) we were asked to start paying a small monthly amount ($20 or so for a single person with no dependents)

  • avatar
    King Bojack

    My daughter, 1 year old needed MRIs and bloodwork and a few other tests to ensure her development delays aren’t due to serious conditions. After insurance the bill was a couple grand. My wife and I are extremely tight on cash (she’s in grad school and I’m back in school for a career change) and this alone bankrupted us. We had insurance too.

    This alone proved to me that America’s health care system is shit. The whole thing. Many DOCTORS can’t fucking stand our insurance system either. No one deserves to have a doctor say “You need this” and then to have to say… Should I get this test or keep the lights on. But it happens all the time.

    Anyways, back to the real topic…. Boo trade wars. Boo our government for not making America an attractive place to make shit. Boo government, boo!

  • avatar
    Patrickj

    What does a country with almost no exports have to lose in a trade war?

  • avatar
    texmln

    If universal health care is so shitty why do other countries, democratic ones at that keep it going? Answer me that any dipshit who thinks US health care is anywhere near good.

    1) For the same reason people in this country keep voting to give themselves ‘free’ stuff, even though it’s bankrupting the country and 2) because they know no other system and change is frightening.

    It may take a few years of socialized medicine for you to actually come to the realization that the U.S. currently provides the finest health care on the planet. And when you do, it will be too late.

  • avatar
    guyincognito

    @ John Horner:

    I agree that our trade imbalance is not sustainable, but I don’t believe that protectionism will work to correct this imbalance. As China and India expand their economies the importance of the US consumer is being reduced, just as the real wealth we produce and earn is going down.

    Eventually, though, Chinese, Indian, Malaysian, etc. workers will start to demand higher wages. Eventually, there will be parity between their wages and ours and manufacturing will shift back to the US. Then we’ll have billions of Chinese and Indian consumers who may wish to buy American made products. Unfortunately, we’ve got a long way to go before then and its gonna suck for us in the mean time.

  • avatar
    dkulmacz

    Another case for idealistic zealots to preach their unrealistic crap in spite of common sense. Like ‘free market’ in general, ‘globalism’ is hard to argue theoretically. But that does not mean that it is without real problems that need to be addressed with ‘heretic’ ideas.

    Thanks to our friend the internet, we’re getting to the point in this country where supposed aspirational jobs can be (and increasingly are) farmed out overseas. Obviously much IT work has gone that route. Now I hear it is legal research and brief generation; medical diagnosis based on electronic tests; writing basic news stories i.e., wire service stuff . . . where does it stop? What do the people of our country aspire to anymore when even doctoring and lawyering are now done cheaper online half a globe away? What ‘training’ do they get after law school or med school? Maybe we should all be reality TV stars.

    It’s like we’ve done some calculation showing we’re worth more money dead than alive, so we slit our own throat.

  • avatar
    Rextra

    “TRAIN AND EDUCATE yourself and get a MUCH BETTERjob…”
    — OK, so we’re all now TRAINED AND EDUCATED, now what? There are only so many burger-flipping jobs and there are only so many TRAINED AND EDUCATED jobs. Now what? Huh? Huh? Now what? Come on; now what? Oooh, oooh, I know, just wait ’til 2040, 2050, or so when China is so wealthy that they start looking around for someone to cheaply produce the things they want, and manufacturing will come back to “third-world” America, where many people will then be willing to work for dried dung.

    “WALMART has tremendously increased the standard of living of the POOREST of Americans and made them able to afford all the things they could not even dream of owning a few decades ago.”
    — WalMart has only made them able to afford a cheaply made FACSIMILE of what they dream of. Only people who heat their hovels with dried dung dream of owning what WalMart sells!

    Advertising is fascinating for it’s psychology and the art work is often glorious, but it is responsible for making people think they need it all to live well. If American POWs were subjected to what the American population is fed via advertising on a daily basis, we would be hauling all advertisers to the World Court in The Hauge.

  • avatar
    derm81

    Eventually, though, Chinese, Indian, Malaysian, etc. workers will start to demand higher wages.

    Who is going to make cheap goods for China 30 years down the road when they reach the place where we (The US) are now? Who will be the next “China” in 35 years? Africa?

  • avatar
    fincar1

    “No one deserves to have a doctor say “You need this” and then to have to say… Should I get this test or keep the lights on. But it happens all the time.”

    You would prefer, I suppose, under the system you want where the government is the payer for health care, to have a GS5 clerk tell you that instead?

  • avatar
    taxman100

    Back in the day when this country was pretty much self-sufficient, trade wars had little effect.

    Then Washington and Wall Street got into bed together, and the needs and wants of the people took a back seat.

    If there are 200 million working people, does “retraining” mean we will be a country of 200 million retail, service, and government employees?

    I don’t see much else staying in this country.

  • avatar

    Juniper:

    Obviously a complex situation, and one you are personally affected by.

    Right on the first half, wrong on the second.

    1.) I don’t touch tires.
    2.) We don’t ship to the US. It’s a snakepit of vague regulations, no enforcement, and rabid lawyers.

  • avatar

    Great article, Herr Schmitt.

    “They drink it in big gulps: Imports bad for jobs. When they find out that fewer low cost imports mean higher prices, that they still have no jobs, and that their welfare check buys much less, then it’s too late.”

    Well said. Although, I would add, just like The Government Itself, it doesn’t make one bit of difference to welfare recipients because they get their money for free. What’s the difference if they lose a little face or buying power, respectively? No sweat off their brow.

    And as someone who’s job is a small business where the inventory comes directly from Germany, that exchange rate roller coaster sure doesn’t feel fun sometimes.

  • avatar
    Juniper

    Bertel
    I was being more general, not tires, but auto parts in general, brakes etc.

  • avatar
    Juniper

    Bertel
    Your #2
    Just like China except for the lawyers.

  • avatar
    yalej

    It’s always fashionable to claim that China has us by the balls, but it takes two to tango.

    Does anyone know what percentage of Chinese exports is purchased by the US (both consumer and raw material/industrial stuff)?

    What is the Chinese capacity to replace US exports by domestic demand and/or other markets in the near term?

  • avatar
    dilbert

    China is too smart to let something of this scale affect their lucrative trade with the US. They might pose and strut, but at the end of the day, as long as this doesn’t become a habit, it will pass quickly.

    I suspect Obama has taken this into his calculation on whether or not to pander (further) to the unions.

  • avatar
    Adub

    50s Era Golden Age ranters need to remember that the United States enjoyed its lazy pre-eminence post-WWII because every other factory on the planet had been bombed to rubble. And prior to that, WE were the low-cost non-unionized industrial producer.

  • avatar
    cmus

    I’m a little confused by the “43 percent of the tires sold in the USA are imported” from the WSJ…how does that work? I was under the (apparently mistaken) information that only Cooper Tires actually still manufactured tires in the US for passenger cars. (and not *all* of them either) So, that either means that Cooper has an overwhelming share of the US Tire market, or (more likely) the definition of “imported” is different than I am expecting.

    Clarification anyone?

  • avatar
    Juniper

    Bertel
    The heart of the matter (in my opinion) is the IP issues.
    No comment on that?

  • avatar

    Juniper:

    What’s IP got to do with it?

    If an American company like Cooper Tires sets up a joint venture with a Chinese company, they write nice contracts covering the IP issues. There is not much IP in a tire, except for the profile.

    Cmus: Think NAFTA.

  • avatar
    John Horner

    Even Adam Smith was not a doctrinaire exponent of “free trade”, modern American style.

  • avatar
    John Horner

    “I was under the (apparently mistaken) information that only Cooper Tires actually still manufactured tires in the US for passenger cars.”

    You are very mistaken. Goodyear, Bridgestone-Firesonte, Michelin, Yokohama, Pirelli and others all have US factories cranking out passenger car tires every day.

    Some examples:

    Pirelli adds fifth line to Georgia factory:

    http://www.fleetmag.com/web/online/Industry-News/Pirelli-Tire-Adds-Fifth-Manufacturing-Line-to-Georgia-Facility/1$1842

    List of Bridgestone’s Americas factories(North, Central & South):

    http://www.bridgestone-firestone.com/mfglocations_index.asp?id=about/directory_tireplants

  • avatar
    Dynamic88

    We aren’t going to prosper by buying cheap stuff made in India, China, Malaysia, etc.

    If it were true that all Americans were busy working as video game developers, then we could let the third world do our manufacturing for us – maybe. But it’s not true that all Americans are video game developers. Some Americans make steel, some make tires, etc. etc. etc. There aren’t enough jobs here as it is.

  • avatar
    OldandSlow

    I see that my previous post sent Autosavant into full flame mode. – but the truth is it’s a bit late to slam the door on automotive imports. That would have to have been done during the Carter or Ford administration.

    Like or not, the US consumer is addicted to inexpensive stuff, and too much stuff at that.

    Automotive repair parts for older cars are increasingly repros made in China. It’s not the fault of the Chinese. They only make under contract what very important men in suits, in fancy offices, pouring over spread sheets decide will be produced.

    Those important men in suits reside here not in China. The men in suits are keen on the fact that the US consumer wants a $10 widget at a $5 price.

    With regards to intellectual property, I’ve seen clones of the Weber IDF carburetor. The clones are currently being sold in the US for 2/3rds the price of the Weber by a US importer name EMPI. Weber still makes the IDF line in unionized factory in Spain. So much for intellectual property rights.

    I’m waiting to see how these carb bodies will wear in with regards to throttle shaft wear due to the aluminum used for the body.

    Rebuilt Bosch Alternators now compete against new units from China sold under the Euromax brand for the same price. The Chinese unit which is new starts charging at 1200 rpm versus 900 rpm for the Bosch unit. The mechanic’s response to the customer is that they all do that now.

    I ordered a way-to-cheap set of all new axles with C/V joints and boots from a long time supplier for about the price I’d pay for just the C/V joints.

    Sure enough the axles and C/V joints were made in China. The supposedly hardened bearing races were all blue from someone not using enough oil during milling.

    I don’t blame the Chinese for the lax quality control. I blame the US importer – whose “this is the first we’ve heard of it” response was similar to the folks at EMPI when told that the machine work on their carb leaves a lot to be desired.

    The genie is already out of the bottle. You ain’t goin to put him back in with the Trillions of Dollars worth of I.O.U.s we have floating around the planet.

    If you put a tariff on Chinese tires, the US private label importers will out source them to India or somewhere else. It’ll be like playing wack-a-mole.

  • avatar
    mattstairs

    China and the US are really co-dependent now, so I think that this will get resolved sooner or later.

    I think there have been some good points made here about trade. From a free market, free trade perspective, the law of comparative advantage says that in the whole, societies are better off specializing in what they do best and trading for the rest.

    The problem is that free trade has small, widespread societal benefits and large, concentrated individual losses.

    Take textiles, for example, an industry that has largely left the US. On one hand, all the consumers in the US have saved some bucks on their clothes. On the other hand, textile manufacturing areas in the US were devastated. In total, the US is better off, but if you were a textile worker, sorry, Charlie.

  • avatar

    The economic issues related to trade with China are probably too big to address on TTAC, but I want to take a moment to specifically address Chinese tires.

    They are junk. Every last one of them. Period. Point blank, whether they are “co-branded” with a US manufacturer or sold through one of the Chinese-only brands.

    Tires are the last place on a car one should skimp, and it’s very possible to be killed by someone else’s tire decisions.

    Hello, even the Koreans don’t make a decent tire yet. Kumho and Hankook make decent competition tires but people tend to throw out their competition tires after 20 heat cycles. Street tires are not afforded the same luxury.

    The prevalence of Chinese tires affects the existing producers of halfway-decent non-Chinese tires. It starts a race to the bottom that will get someone killed.

    Incidentally, I’ve also had bad experiences with Malaysian BFG tires.

    Do yourself a favor. Don’t buy a tire that is not made in the United States, France, Italy, or Germany.

  • avatar
    PanzerJaeger

    One of the most boneheaded things Obama has done?

    HAH!

    Its surely boneheaded, but compared to the other policies he has implemented or is trying to implement… this is nothing.

  • avatar
    John Horner

    “Don’t buy a tire that is not made in the United States, France, Italy, or Germany.”

    I would add Canada, Norway (Hakkapeliitta snow tires) and Japan to the list of generally high quality tire manufacturing countries.

  • avatar
    CamaroKid

    Destroying the best health care system in the world – that successfully serves 280 million people

    I didn’t know you live in France… The American health-care system is NOT the best in the world… It isn’t even in the top 10.

  • avatar
    Gunit

    Interesting move. Letting the currency fall seems a much easier way to reduce imports, and wouldn’t piss anyone off in the process.

    Seems everyone realizes the Chinese are not to blame for this, it’s really something the consumers have foisted upon themselves by purchasing the biggest/cheapest/poorest backed product available.

    As for destroying the best health care system in the world, I think you mean the 37th best. We’re number 37, we’re number….

    http://www.photius.com/rankings/healthranks.html

  • avatar
    diekaste

    The sooner nationalism dies the happier I ll be. To which the better luck humanity will have of surviving beyond our adolescence.

  • avatar
    John Horner

    ” … that successfully serves 280 million people … ”

    Over 43 million of which are in government run Medicare. If you are against “government healthcare” then logically you should be against Medicare, Medicaid, the VA and the amazing health care members of Congress get at Bethesda Naval Medical Center. You do know that the supposed champions of private health insurance in the Senate routinely take advantage of their free access to Bethesda when they need surgery, right? Senate Minority Leader Mitch McConnell had his free heart bypass surgery at Bethesda. John McCain had his melanoma removed there. Senator Bond of Missouri had his hip replacement there. The list goes on.

    http://cafewitteveen.wordpress.com/2009/09/02/whats-excellent-health-care-for-repub-senators-is-too-good-for-the-rest-of-us/

  • avatar
    mpresley

    One shared belief among the politicians, scholars and businessmen is that protectionism does no one good. The latest protectionist drive of America will damage the interests of …U.S. consumers. America’s tire industry may also be a loser.

    Taken from a recent People’s Daily editorial. How things have changed…imagine, the official Chinese “Pravda” arguing for and concerned about the welfare of American consumers. And they say the Oriental mind is inscrutable (wink wink).

  • avatar
    geeber

    CamaroKid: I didn’t know you live in France… The American health-care system is NOT the best in the world… It isn’t even in the top 10.

    Once you strip out the World Health Organization’s (WHO) politically motivated measurements that have nothing to do with providing health care, and adjust for different ways of measuring results (i.e., infant mortality rates), the U.S. system is among the best in the world.

    John Horner: Over 43 million of which are in government run Medicare.

    Which is going broke. Pointing to Medicare as an example of a successful health care program is like pointing to GM as an example of a successful car company.

    John Horner: You do know that the supposed champions of private health insurance in the Senate routinely take advantage of their free access to Bethesda when they need surgery, right?

    Do you really believe that any government plan is going to extend the same level of care and benefits to the entire population that members of the U.S. Senate enjoy?

    The one proposed by Sen. Obama doesn’t…if I recall correctly, Congress has conveniently exempted itself from the provisions of the proposed national health care bill.

  • avatar
    Matt51

    There are a substantial number of English people moving to France, because France has better health care. France also has a life span greater than the US, only one year short of Japan.
    But rather than a debate on the merits of national health care, which I guess we should pattern after France based on results, we have to realize 1) We can’t expect citizens who can’t afford to make ends meet, to be forced to purchase overpriced private health care 2) small businesses should not be forced to pay for health care they cannot afford 3) forcing big companies like GM to provide health care puts them out of business.
    The only way US companies can have a level playing field with other countries, is if the burden of providing health care is removed. When health care was cheap, they could afford to do this. US companies can no longer carry this burden.

  • avatar
    Steven Lang

    Folks, hate to break this to you. But most of what China sells as it relates to autos and transportation in general is garbage.

    Their motorcycles and scooters? Absolute complete junk. The reason why the Americans, Europeans, Koreans and Japanese firms still rule the roost is because the Chinese motorcycle companies cater to a low price / low quality clientele in their country. Even when they rip off other company’s designs, the results fall short because of substandard materials, atrocious quality control, and Communist inspired responses to customer service issues.

    Tires? I have yet to find a good one. The cheapos that they sell at Wal-Mart and Pep Boys (and the used tire places) either go out of round or wear out well before the mileage states.

    You actually save more money in the long run buying a high quality tire at a premium price vs. the $40 Wal-Mart specials. On average you can expect a 2 MPG improvement and twice the real world reliability.

    As for cars… let’s just say that state owned and controlled enterprises NEVER rule the roost. American or otherwise.

  • avatar
    OldWingGuy

    I tend to agree with OldandSlow. I’m not sure his name refers to him personally, or his vehicle. Or maybe both.
    But he seems to be the most pragmatic of all.
    I don’t put much stock in all the Econ 101 talk, etc. The MBAs did such a fine job with their equations and computers spreading the housing risk around. And not the first time – does anyone remember Long Term Capital Management ?
    I don’t know what the solution is.
    But my personal experience: I was at a manufacturing plant in Milwaukee this spring. A huge old plant, used to have 10,000+ employees working there. Now, just 200 people, they can’t even afford to heat the place or fix the broken windows. Sad. Really sad.
    I have been looking to buy a new metal lathe. You can find cheap Chinese lathes for about $5k. A nice South Bend lathe, about $20k. In the end, I decided to wait and buy the South Bend lathe. Not because I’m overly patriotic or trying to save someone’s union job. But because I want something to be proud of.
    I encourage you to read the book “Poorly Made In China”, or “Cheap”. Some facinating insights.

  • avatar
    Juniper

    Bertel
    You continue to avoid the issue. Do YOUR suppliers use legal licensed software? Can you buy pirated movies,etc. on many street corners. You are saying companies require independent contracts to keep their IP safe? Are there not WTO rules covering this? Does China strenuously enforce them?

  • avatar
    CamaroKid

    Once you strip out the World Health Organization’s (WHO) politically motivated measurements that have nothing to do with providing health care, and adjust for different ways of measuring results (i.e., infant mortality rates), the U.S. system is among the best in the world.

    Yes, funny thing about facts and science, they have a liberal bias…

    By almost every measure that would be of any importance. America does NOT have the best or even “among” the best systems in the world…

    You see the problem with the WHO is they measure everyone in the country… not just the people covered… People are dying left and right without coverage. Life expectancy? 24th, Infant mortality? 49th. Many of these FACTs have nothing to do with the WHO… Infant mortality was calculated by the CIA!

    The only measure that has America near the top is on cost… Our health-care system is the SECOND most expensive in the world.

    over 70% of Americans agree that it is broken and needs to be fixed…

  • avatar
    niky

    CamaroKid :
    September 13th, 2009 at 11:59 am

    Yes, funny thing about facts and science, they have a liberal bias…

    Wahahaha!!!

  • avatar

    Juniper:
    You continue to avoid the issue. Do YOUR suppliers use legal licensed software? Can you buy pirated movies,etc. on many street corners. You are saying companies require independent contracts to keep their IP safe? Are there not WTO rules covering this? Does China strenuously enforce them?

    OMG, McCarthy rose from the dead.

    Upon advice of my counsel, I am invoking my right to remain silent pursuant to the 5th Amendment of the United States Constitution.

  • avatar
    John Horner

    “OMG, McCarthy rose from the dead.”

    Hardly.

  • avatar

    When we were just about ready to go to the USA, the USA blocked lamb imports from Australia.

    This had two consequences:

    * Australian retail lamb price plummeted. Yay! Yummy!
    * Australian lamb farmers had to start doing something else as they’d go broke at those prices.

    When we finally relocated to the USA in late 2006, we couldn’t get lamb – at any price – at any of local supermarkets including the “fancy” ones that sold untainted produce.

    So I doubt blocking Australian lamb had ANY effect on US lamb prices or improved the livelihoods of US lamb graziers. If retail customers of lamb can’t buy it, there’s no market to protect.

    Protectionism is just plain dumb. It never has the consequences you expect and many you don’t expect.

  • avatar
    cdotson

    Andrew van der Stock: You Aussies can keep your lamb. Nobody here eats that junk. I had some lamb from a fairly high-end restaurant locally and even it was pretty bad (esp. compared to their filet). I think the only thing lambs are raised for over here is their wool.

    I bought a set of Hankook tires for my truck 2 years ago because I’d read they were pretty decent and were cheaper, and read elsewhere that Korean manufacturers and tire companies were coming into their own. When i got them I noticed they said “made in china” but they had excellent ride/noise, fuel efficiency, wet and dry traction, and the one occasion we saw snow they worked very well for all-season Pmetric truck/suv tires. I could watch the tread disappear before my eyes. I wasn’t budgeting to replace them within 25k miles so I just swapped out the two most worn ones (one of which had a nail anyway) with two tires from a non-premium brand that was rated #1 by both Consumer Reports and Tirerack.com and cost the same as I recall the Hankooks did 2 years ago. Equally excellent ride/traction/efficiency. “Made in USA.” I’ll be going back for the other two in a few months.

  • avatar
    geeber

    CamaroKid: Yes, funny thing about facts and science, they have a liberal bias…

    You need to do more research; then you’ll actually be acquainted with real facts and science, instead of the often-simplistic talking points by people who advocate a single-payer system.

    Here are some facts regarding American health care:

    *American have better survival rates than Europeans for common cancers, including breast cancer, prostate cancer and colorectal cancer.

    *Americans have a lower cancer mortality rate than Canadians.

    *Americans have better access to treatment for chronic diseases than patients in other countries.

    *Lower-income Americans are in better health than comparable Canadians.

    *Americans spend less time waiting for care than patients in Canada and Great Britain.

    *America leads the world in medical research.

    CarmaroKid: By almost every measure that would be of any importance. America does NOT have the best or even “among” the best systems in the world…

    See above.

    CamaroKid: You see the problem with the WHO is they measure everyone in the country… not just the people covered… People are dying left and right without coverage.

    Wrong. You make a common mistake – equating no health insurance with no health care coverage. People still receive treatment without insurance. And please note that the largest block of people without insurance are healthy 20-somethings who don’t see the need to purchase insurance. They aren’t “dying” from a lack of insurance.

    CamaroKid; Life expectancy? 24th,

    Life expectancy is tied more to cultural factors than to whether people have health insurance.

    Within the U.S., different groups were studied for longevity. One of the groups with the longest life spans was a group that was actually relatively poor and didn’t have insurance coverage (a small group of Indians). Genetics and lifestyle are more important than insurance coverage regarding life expectancy.

    Note that the highest life expectancies are found in Asian countries that have diets based on fish and plants. If you want to boost the typical life expectancy for the U.S., encourage a lot of Asians to come here and bring their lifestyle and dietary habits with them.

    CamaroKid: Many of these FACTs have nothing to do with the WHO… Infant mortality was calculated by the CIA!

    It wasn’t “calculated” by the CIA. The CIA merely accepts the numbers reported by other countries. The CIA isn’t on the ground in each country, gathering facts and figures on infant mortality. The CIA compiles the numbers reported by each country.

    The simple fact is that within the U.S., an infant is counted as a live birth if it lives for an hour outside of the mother’s womb. Thus, if it dies six hours later, it is counted among the infant mortality rate. In Europe, an infant is not counted as live birth until it survives for much longer. Thus, their infanty mortality rate looks much better. That doesn’t prove it is much better.

    And let’s not get into the much more aggressive use of euthanasia practiced on defective newborns in Europe.

    To use an automotive example – imagine J.D. Powers collects the number of defects on new cars before they are sold to a paying customer.

    It relies on the numbers provided by each individual manufacturer. J.D. Powers does not have personnel in each dealership counting the defects on each new car.

    Ford and Toyota count defects caught at the factory, AND by the dealer.

    GM and VW, meanwhile, only count defects caught at the factory.

    GM and VW supposedly have better initial build quality…at least, that is the impression one gets from reading the results compiled by J.D. Powers. The reality, however, is different. Same with the infant mortality rates supposedly “calculated” by the CIA.

    CamaroKid: over 70% of Americans agree that it is broken and needs to be fixed…

    Well, yes, they think they are going to get something for nothing, or by taxing someone else.

    A majority of Americans once supported Prohibition and the 55 mph speed limit. I hope that no one is dumb enough to think that those are still good ideas…

  • avatar
    Lokkii

    +1 Geeber

    There are lies, damn’d lies, and statistics.

    From what I’ve read your version is closer to the truth than the claims that rank us so low on the international healthcare totempole.

    Another factor that I believe (with zero evidence, so let’s make sure that’s clear to everyone) is that our more diverse population with a substantial percentage (compared to other countries) of recent immigrants adversely impacts our statistics.

    Say you have – just to grab a number 12M people who didn’t have good health care or diets as children move to your country. You may find that the health of this population has an adverse impact on your numbers.

    Just speculating.


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