On Monday, June 29, the US International Trade Commission announced its remedy recommendations in the Special China Safeguard (Section 421) investigation of certain passenger vehicle and light truck tires from China, a case which will prove a “litmus test” of sorts for the Obama Administration's stance on foreign trade.
The four Commissioners who had earlier made affirmative determinations of market disruption by reason of imported Chinese tires made the following recommendation: increased duties on imports for a three-year period, starting with a 55 percent duty in the first year, followed by a 45 percent duty in the second year and a 35 percent duty in the third year.
The two Commissioners who had made negative determinations of market disruption recommended no trade restricting actions and instead recommended that Trade Adjustment Assistance be extended to US workers who are affected by imports.
The United Steelworkers (USW), which filed the case in April, had requested the imposition of quotas on imported tires from China, with the aim of capping Chinese tire imports at their 2005 level of 21 million. The USW cited 5,100 US jobs lost and another 3,000 at risk due to low-priced Chinese tire imports, which increased 215 percent in volume from 2004 to 2008, according to the USW's petition.
The case will now be taken up by the Office of the US Trade Representative (USTR), which will conduct a separate investigation in conjunction with representatives from other Executive departments and agencies before making a recommendation to the President, who will make a final decision by mid-September.
This case is considered to be a test case for the Obama Adminstration's stance on international trade as it will be the first Section 421 case to reach the desk of Mr. Obama. Six Section 421 cases were brought during the previous administration, but in each case, President George W. Bush exercisesd his authority to deny relief despite the ITC's recommendation to grant relief in four cases – all of which involved steel products.
Section 421 is a temporary country-specific safeguard that China agreed to as part of its bilateral trade negotiations with the US leading to its 2001 membership in the World Trade Organization.