Obama’s Trade Policy Test
A special safeguard case against imported tires from China, initiated by the United Steelworkers (USW), was announced this week. Under China's WTO accession agreement, members are permitted special safeguards until 2013. This is the first such case filed under the new administration. The U.S. International Trade Commission has 60 days to rule on the petition and make a recommendation. If it rules in favor, President Obama will have 90 days to decide on a remedy.
During the previous administration, six special safeguard cases were filed, four went to President Bush, but none were acted on. Bush cited standard free trade principles in declining to act.
What’s at stake? According to news reports (WSJ, Reuters), China is the largest source of U.S. tire imports. In 2008, China exported nearly 46 million tires worth more than $1.7 billion to the United States. The USW petition calls for a quota of 21 million tires, returning imports to the 2005 level. The USW represents about 15,000 tire workers and accounts for about half of U.S. tire production.
This is a case to watch. During his Presidential campaign, Obama promised to consider such safeguard petitions, winning support from labor unions. At the recent G20 summit, world leaders made a commitment to refrain from raising new barriers to trade. There is also the special U.S.-China relationship. In his nomination hearing, Tim Geithner annoyed the Chinese by bringing up exchange rate manipulation. Premier Wen Jiabao responded in turn by highlighting concern over the safety of China’s US-dollar denominated assets.
If the USITC decides in favor of USW, Obama will be in a very tight spot.
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At a time when the US and the world is struggling to come out of the financial crisis, the Chinese example is very clear for countries to copy in terms of policies, creativity, patriotism, respect, humility and love. This greatly accounts for their success story even in the face of the global financial crunch. Should the USITC decide in favour of USW, I agree to an extent that President Obama is going to be in a very tight spot. This is because not everybody will be satisfied with the final decision that will be taken by the President. But then in the face of a crisis like this one, people including decision makers have to be flexible. Decisions must be taken with respect to the present circumstances. People will also learn not to be selfish and work for the good of all.
As Obama himself always says in some of his speeches after the elections, the campaign period is over and every body must contribute to build a new world. The labour union should not expect anything more than a measure that will benefit both governments. USW should upgrade their competencies in order to compete with China. We are gradually moving to a free market world with the advent of globalisation.
However, if Obama wants to encourage the USW then there must be some form of protection. This will undoubtedly lead to some criticism or stiff opposition from some world leaders who are strongly in favour of free trade. Free trade is good but we must understand that countries are not the same. It is better to avoid new forms of trade barriers that are not favourable but maintain measures that will benefit everybody. As far as the Chinese government is concerned, I do not think this is a big problem. They are very understanding and that is why they have been succeeding in countries across the world.
Generally speaking, this is a critical issue that President Obama will have to tackle, but I know he is up to the task. President Obama knows that he cannot succeed alone and that is why he always tries to be explicit in his decisions in order to win the support of the public and the international community.
Posted by: Kibinkiri Eric | Apr 28, 2009 8:38:53 AM