As everyone has probably heard by now (although you may not have heard, as the decision was announced late on Friday night) the Obama administration has decided to impose tariffs on Chinese tire imports pursuant to the China-specific safeguard mechanism. The rates are 35 percent ad valorem in the first year, 30 percent in the second year, and 25 percent in the third year
The reactions are not too surprising. Free trader Dan Ikenson of the Cato Institute is not happy:
American credibility on trade is spent. And maybe Obama will find comfort in that fact because he won’t be burdened with that historic responsibility, as he signs off on the slew of new requests for trade restrictions (which are undoubtedly coming soon) under this law from other U.S. industries seeking handouts.
By contrast, the AFL-CIO is pleased:
President Obama took decisive action yesterday to provide relief to the domestic consumer tire industry in response to surging exports of tires from China. His actions will bring relief to many workers and their families and reverse course after eight years of neglect of trade laws by the Bush administration.
I'm just going to make two quick, general comments on all of this. First, regardless of where you stand on the issue of free trade versus protectionism, I don't see how this action can be characterized as anything other than protectionism. These are tariffs imposed on foreign products without any finding of wrongdoing by the foreign companies or governments. That's protectionism. So, I didn't find these comments by U.S. government officials defending the tariffs to be very convincing:
"The president is very committed to open and free trade," the official added. "Part of that is being committed to enforcing trade laws and trade agreements."
...
"We don't view enforcing trade laws as protectionism," the White House official said.
With regard to the part about trade agreements, I don't think these actions can be accurately described as enforcing trade agreements. In my view, enforcing a trade agreement would mean bringing a complaint under the trade agreement dispute procedures, alleging that someone is violating the agreement. That's not what is happening here. There is no allegation that China is violating a trade agreement. Rather, the situation is that the trade agreement permits governments to take action to limit imports in certain circumstances, pursuant to domestic procedures. So, yes, the action is an effort to "enforce [domestic] trade laws." However, that does not mean the action is not protectionist. When the domestic trade law creates a mechanism to impose protective tariffs in these circumstances, actions under that law are protectionist.
But that may be a bit nit-picky. The bigger question is, what are the implications of this decision for U.S. trade policy? On this one, I'm inclined to agree with Charlene Barshefsky:
Charlene Barshefsky, who served as United States Trade Representative under President Clinton, said she did not think the decision signals any broad reversal in trade policy. “The administration has made it clear that it recognizes that open markets are one of the keys to the economic recovery,” Ms. Barshefsky said.
Yes, this particular action is protectionist, and as Dan Ikenson notes above, there may be similar actions coming (and perhaps the administration could have made clear they would look critically at future requests). But these actions are fairly minor in the grand scheme of trade policy. The overall Obama trade policy will be motivated by free trade, even though we will see more individual protectionist actions than under the previous administration.
