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Trade Tensions Flare Between U.S., China as G-20 Nears

September 15, 2009 at 12:00 AM EDT
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New U.S. tariffs on Chinese tire imports have created a feud between the two nations ahead of next week's meeting of the Group of 20 industrial and developing nations. Trade experts speak with Jeffrey Brown about how the dispute will affect future U.S.-China trade.

GWEN IFILL: And still to come on the NewsHour tonight: wavering support for the Afghan war; charges of war crimes in the Gaza conflict; and Tanzania’s doctor shortage. That follows the trade tug-of-war between the U.S. and China. It’s over tire imports.

Jeffrey Brown has the story.

JEFFREY BROWN: The president’s appearance before big labor today came just days after a set of trade sanctions announced by his administration that brought praise from unions and reproach from free trade advocates.

Late Friday, the U.S. said it would impose a 35 percent tariff on Chinese-made tires. That followed a complaint by the steelworkers union, contending that Chinese imports are flooding the market and have led to the loss of some 5,000 American jobs.

Yesterday, the Chinese government warned it might retaliate against American auto and poultry exports and said it would bring its own complaint to the World Trade Organization.

We explore this trade tiff and its potential consequences now with Congressman Sander Levin of Michigan, a Democrat who chairs a key trade subcommittee, and Daniel Price. He was an assistant to President Bush for international economic advisers and he’s now a partner at the law firm of Sidley Austin.

Congressman Levin, I’ll start with you. Fill in the picture as you see it. What’s the case for sanctions here?

REP. SANDER LEVIN, D-Mich.: This isn’t a case of free trade versus unions. This is a matter of trade policy, sound trade policy. When China entered the WTO, we worked on this. They agreed specifically to section 421. If there was a surge of products, we could take action. And there was here. And the International Trade Commission, the ITC, found that.

In just four years, tire imports here surged from 15 million to over 45 million. Prices were undercut by that. There was a 30 percent displacement in terms of American production, and about 5,000 American jobs were lost.

So this was a matter of sound trade policy. The president has said during the campaign that he was going to enforce trade agreements reached by the Congress, take each of these cases one by one. He took this case, and he abided by the ITC recommendation, unlike the Bush administration. Four times the ITC recommended action; four times the Bush administration said no.

Sound trade policy means expanded trade and rules of competition, and that’s what is exactly at stake here.

The rationale for the tariff

Rep. Sander Levin
[T]he United States is saying, look, trade policy won't work if we have expanded trade and rules of competition, but the rules of competition aren't followed by the other country.

JEFFREY BROWN: All right, let me get a response from Daniel Price. Sound trade policy? How do you see it?

DANIEL PRICE, former presidential adviser on trade: I see it a little bit differently. What's so curious here is that there was no allegation of unfair trade. There's no allegation of subsidies or dumping. Rather, this provision was invoked to deal with the consequences of fairly traded goods, but it was originally negotiated with China to allow the U.S. domestic industry time to adjust to a surge in imports.

Curiously, we have no domestic manufacturing in the type of tires that are at issue here. So it leaves many wondering why this import tariff was imposed to protect a domestic manufacturing capacity that simply does not exist.

JEFFREY BROWN: Some people brought up -- some people point to politics as -- to support -- the president's helping support -- or the president helping his supporters -- excuse me -- the trade unions. Is that what you're suggesting?

DANIEL PRICE: Well, you know, it's interesting. Given that there was no real national economic interest at stake, one can ask, what was the motivation? Now, some have suggested, including Congressman Levin, that taking this type of action will pave the way for positive trade initiatives in the future.

I certainly hope that's the case, but one must view this action against the backdrop of the inaction of this administration and the Congress on the pending Korea and Colombia free trade agreements and, really, a fairly stale, if not nonexistent affirmative agenda.

JEFFREY BROWN: All right, let me go back to Congressman Levin. Go ahead. Do you see a real gain for American workers in this?

REP. SANDER LEVIN: Absolutely. Absolutely. The attack just heard is absolutely wrong. Tires made by these companies include the tires imported from China. That's fact number one.

Number two, when we negotiated 421, it simply required there be a surge, that there had to be a significant impact in terms of injury. That's true here. The surge was clear, 45 million versus 15 million. It impacted jobs in the United States of America.

And this notion that we had to find other things, when China specifically agreed to section 421 when they entered the WTO, and what the president was doing was enforcing the China agreement with China. And now that they're going to the WTO, it's better than unilateral action by them, but when they agree to something, essentially the president of the United States is saying, look, trade policy won't work if we have expanded trade and rules of competition, but the rules of competition aren't followed by the other country.

There has to be a mutuality here, and that's what section 421 is involved. Jobs were at stake here. The president stood up for jobs in America, under section 421 specifically put in to the China entry into the WTO.

Fears of a trade war

Daniel Price
Former Presidential Advisor on Trade
I think our trading partners, not just China, are going to look at this with some alarm.

JEFFREY BROWN: Mr. Price, what is the fear here about creating a kind of trade war with China? What is the potential that they have to impose on us? What do you see happening?

DANIEL PRICE: Well, there's two concerns. But, first, could I say, I agree with Congressman Levin that we need vigorous enforcement. And, in fact, the Bush administration brought I believe it was eight WTO cases against China.

REP. SANDER LEVIN: Yes, only six of them, Dan, when we took over the House. Before that, the Bush administration sat on its hands in terms of trade relations with China and the rest of the country, other countries.

And the way they handled 421 was the supreme example. Four times, the ITC said, "Act." Four times, the Bush administration sat on its hands. What this administration is saying, hands-on, instead of this hands-off approach.

JEFFREY BROWN: OK. Come back to where we are right now, Mr. Price.

DANIEL PRICE: Thank you. I think our trading partners, not just China, are going to look at this with some alarm. As I said -- and the congressman and I can disagree about the facts -- there is no domestic manufacturing capacity that has been impaired by these imports.

REP. SANDER LEVIN: That's not true, Dan.


JEFFREY BROWN: Hold on. Hold on, Congressman.

DANIEL PRICE: Right. Second, as I said, it will be looked at in the context of repeated G-20 leader pledges not to engage in protectionist or trade-closing measures, whether or not those measures are permitted by the WTO. There's lots of discretionary actions that governments can take to raise barriers, and this was one taken by this administration, and I think it's unfortunate.

U.S. signal to G-20 nations

Rep. Sander Levin
What the president was saying here was, China, you agreed to it. We're now going to enforce that agreement, because American jobs are at stake.

JEFFREY BROWN: Well, Congressman, that's another issue is the timing, of course. The G-20 meeting is coming up in Pittsburgh pretty soon. The president didn't have to do this at this time. Is there some concern about doing it now and the signal that it sends to the rest of the world?

REP. SANDER LEVIN: Look, there was a time limitation here. Under the law, he had to act one way or the other. And enforcing trade laws agreed to by other countries is not protectionism; it's the opposite of protectionism.

It's for a trade policy built on expanded trade, but with rules of competition that everybody should follow. And what the president was saying here was, China, you agreed to it. We're now going to enforce that agreement, because American jobs are at stake.

JEFFREY BROWN: And, Mr. Levin, just briefly, let me ask you, is there any fear here that this might expand to other areas? I saw that the head of the steelworkers union, Leo Gerard, was talking about at least looking at some other areas of U.S.-China trade. Does that concern you?

REP. SANDER LEVIN: There are standards built into 421. They were met here. There has to be a finding that the standards are met here. There has to be a market disruption. And they found that here, a material impact here, jobs lost, surge of tires.

So I think we have standards here. What we are doing in this case is following those standards, while the Chinese are not. And you can't have sound trade policies when one side abides by its agreement and the other side doesn't.

JEFFREY BROWN: And, Mr. Price, are you worried about this?

DANIEL PRICE: Yes. As I said, there was no allegation that China breached any trade rules or did not abide by agreements.

And I think there is concern about the future. We see -- I read the same quote you did. There's discussion about cement, steel, glass, textiles and apparel. They're lining up to invoke this relief, and they're hoping that the president will do the same thing.

The real question is, having said once yes when there is no domestic manufacturing capability, how do you say no when there, in fact, is? And once you start feeding that protectionism beast, how do you ever sate it?

JEFFREY BROWN: All right, we have to leave it there. We'll watch how this develops. Daniel Price and Congressman Sander Levin, thank you both very much.

REP. SANDER LEVIN: Thank you for having me.

DANIEL PRICE: Thank you.