Emergency Committee For American Trade

ECAT Urges Caution in Section 421 Determination on Chinese Tires

August 19, 2009

The President

The White House

1600 Pennsylvania Ave., N.W.

Washington, D.C. 20500

Dear Mr. President:

America’s leadership remains vital to help spur economic growth, jobs and export opportunities for U.S. enterprises and workers in the international economy. As you consider whether to act, and potentially, what action to take in September pursuant to the Section 421 safeguard case involving imports of tires from China, we urge you to consider carefully the full range of potential remedies that are available, as well as the message that the imposition of trade-restrictive measures will send to our trading partners around the world and the negative effects such tariffs will have on multilateral efforts to accelerate economic recovery. Section 421 represents a useful tool to address market disruption to domestic industries and/or workers from increased imports from China. While the remedies on which section 421 focuses are trade-restrictive, the President’s authority is much broader and non-trade-restrictive remedies can often be the most appropriate responses. Section 421 also directly provides the flexibility to apply no remedy if relief is not in the national economic interest.

At this time of economic crisis, pressures to restrict trade flows are great, both here in the United States and around the world. Yet this is also a time, as you and the other G8 Leaders recognized, when it is vital to “avoid further deterioration of international trade, including refraining from taking decisions to increase tariffs above today’s levels.” This is true, even if raising tariffs is compatible with WTO rules, as recognized by Asia-Pacific Economic Cooperation Ministers Responsible for Trade.

As the world’s largest economy and largest trading nation, America’s actions carry great weight and set a strong model for countries around the world. Imposing the substantial tariffs that were recommended by a majority of the International Trade Commission on fairly traded tires from China will have effects well beyond the domestic tire industry and even the U.S. economy. Countries around the world who have worked to resist protectionism will face heightened pressure to raise their own tariffs and undertake other restrictive measures if the United States itself will not keep its market open. The imposition of such tariffs risks creating a downward protectionist spiral that will hurt millions of American workers who rely upon global engagement for their jobs through exports, foreign direct investment and imports.

Imposing the ITC recommended tariff will also have highly damaging ripple effects throughout the U.S. economy by increasing the cost of imported tires that largely comprise the low-end of the tire market. Since U.S. production has largely shifted away from this tier of the tire market, imposition of the ITC recommendation will increase domestic tire prices in this part of the market, depress tire sales, and lead to very negative effects on downstream wholesalers, retailers, repair shops and their workers and consumers. Given the already documented slowing of tire sales due to the recession, the price impact of the ITC recommendation will also have potentially costly effects on public safety if higher tire costs result in even fewer replacements and increased accidents resulting from tire failures.

Given the extensive costs of imposing the ITC recommendation in this case, particularly at this time of economic crisis, we urge you to consider the use of non-trade restrictive measures that could be better tailored to provide any needed adjustment and other assistance to workers involved in this case, without harming other U.S. workers, enterprises and international efforts supporting global economic recovery. While not specifically provided for under section 421, such adjustment proposals were discussed in the ITC report and are likely to better address the circumstances of this case. In particular, the President should consider the authorization of expedited consideration for trade adjustment assistance or other adjustment assistance for workers and firms affected by the subject imports.

Thank you for your consideration of our views.

Respectfully,

[signed in the original]

Calman J. Cohen

President

Attached Document(s): 08-19-09 ECAT Letter on Tires 421 Case.pdf
08-19-09 ECAT Urges Caution in 421 Decision.pdf