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Tuesday, September 8, 2009

When the rubber meets the road

The Washington Post reports on the first test of President Obama's trade policy; whether or not to make tires more expensive for American drivers.
By Sept. 17, Obama must decide whether to slap a 55 percent tariff on tires imported from China, as recommended by a federal trade panel, or leave the matter alone, as a phalanx of lobbyists representing manufacturers in China and U.S. companies that import from them are urging.

From 2004 to last year, the number of Chinese tires imported to the United States more than tripled, and their share of the U.S. market rose from 5 percent to 17 percent. Over the same period, the share of the U.S. market served by U.S. factories declined by a similar amount. More than 5,000 U.S. jobs were lost.

Opponents of the tariff say the U.S. industry's shrinkage is unrelated to the surge in Chinese imports. The U.S. manufacturers, they say, have strategically moved into pricier, more profitable tires, shifting production of cheaper tires overseas.

American companies decided to start charging more for their product. Consumers sought more affordable options. Those companies now want the federal government to lock in their higher prices.

Like Obama, President Bush campaigned with free trade platitudes, faced a similar test early in his Administration. Bush failed that test by slapping import tariffs on steel. Though he repealed those tariffs a few years later, and pushed for several free trade agreements that have helped the American consumer, it was a bad decision. Here's hoping President Obama lives up to his campaign rhetoric, and allows competition in the tire business without punative tariffs.

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