Sides spar at ITC hearing over Chinese tyre quotas

By Miles Moore, Senior Washington reporter

Washington DC -- Backed by senators and congressmen, the United Steelworkers (USW) argued before the International Trade Commission (ITC) that a quota on Chinese passenger and light truck tyres is crucial to the survival of U.S. tyre manufacturing.

However, major tyre dealers and distributors insisted in opposition that limiting Chinese tyre imports would do nothing to save tyre workers' jobs in the U.S. Instead, they said, it would create a huge gap in tyre supplies-particularly in the Tier 3 lower-price-range-that domestic tyre makers are both ill-equipped and unwilling to fill.

The USW filed its petition for a quota with the ITC April 20, under Section 421 of the U.S. Trade Act. Section 421, which Congress added to the Trade Act in 2000, allows U.S. industries and workers to obtain product-specific import relief in the case of sharp increases in Chinese imports while China makes its transition from a centrally controlled economy to a market economy.

Under its petition, the union seeks a three-year quota on Chinese passenger and light truck tyre imports, restricting them to 21 million the first year-about the level of 2005 shipments from China-and boosting them by 5-percent increments each of the following two years.

The message at the hearing from USW International President Leo Gerard and his supporters was simple: The numbers on Chinese imports since 2004 show that U.S. tyre manufacturers and tyre workers are being swamped.

Chinese passenger and LT tyre imports increased 215 percent by volume between 2004 and 2008, from just under 15 million to over 46 million, the union said. By value, the increase during the period was 295 percent, it said.

According to the USW, Chinese tyre imports grew three to six times faster than all other imports of Chinese products to the U.S. The increase was much higher than those for wire garment hangers or circular welded pipe-two U.S. industries to which the ITC granted Section 421 relief during the administration of George W. Bush, but which President Bush refused to approve, the union said.

Those industries no longer exist in the U.S., the union said.

Meanwhile, the effect of increased Chinese imports on the U.S. industry is evident in the record of plant closings, according to Mr. Gerard. During the period five plants closed, costing more than 5,100 union members their jobs, he said. By the end of this year three more facilities will close, ending more than 3,000 further tyre industry jobs.

In a voice sometimes choked with emotion, Mr. Gerard said a quota is the only way to ensure any sort of survival for the U.S. tyre industry.

“This industry is at a tipping point,” he said. “I don't want to be driven out because the people who are shipping to this country are shipping at the cost of raw materials. We're losing the industry because of rotten business deals.”

President Obama, he added, seems much more likely to grant Section 421 relief than President Bush, should the ITC find in the USW's favor.

When asked why no tyre manufacturers joined the USW in its petition for a quota-as Titan Tire Corp. did in the union's successful antidumping petition against Chinese off-the-road tyres last year-Mr. Gerard said tyre makers feared retaliation from the Chinese government.

“I'm disgusted and angry that America has got to the point that domestic producers are intimidated by another country about enforcing the trade rules China and America agreed to,” he said.

But opponents of the petition-including executives for Les Schwab Tire Centers Inc., Tire Wholesalers Co. Inc., Del-Nat Corp. and GITI Tire U.S.A. Ltd.-gave very different reasons for the tyre makers' absence among the witnesses.

Since about 1995, opponents said, U.S. tyre manufacturers have followed a business strategy emphasizing the production and promotion of Tier 1 tyres (major brand names such as Michelin, Goodyear and Bridgestone) or Tier 2 tyres (well-known names with less cachet than Tier 1, such as Kelly-Springfield, Uniroyal and BFGoodrich) over Tier 3 tyres (though well-made and safe, tyres that have low brand recognition and low prices to match).

“This timing is key,” said Vic DeIorio, executive vice president for sales and business development at GITI Tire. “The major U.S. producers' decision to abandon U.S. production capacity for the Tier 3 market preceded rather than followed major increases in Chinese imports.”

Most of the layoffs Mr. Gerard cited occurred in 2006, not because of Chinese imports but because U.S. tyre makers decided long before to stop making lower-priced tyres, according to Mr. DeIorio. “It was at this point, in 2006, that imports of tyres from China started to grow by approximately 35 percent on a value basis,” he said.

Del-Nat started feeling the changes in 1998, when companies such as Michelin Americas Small Tires, Continental Tire North America Inc. and Yokohama Tire Corp. canceled or refused to renew their contracts to supply the company with tyres, according to Del-Nat President James Mayfield.

“Today we literally travel the world to find manufacturers who can produce tyres we need which meet U.S. safety standards,” Mr. Mayfield said. Having worked for Conti for nine years among other companies before joining Del-Nat, he said, he knew Chinese imports had nothing to do with the closings of the Conti plants in Mayfield, Ky., or Charlotte, N.C.

Les Schwab has always specialized in Tier 3 tyres, and limiting Chinese imports would be a terrible blow to the company, according to CEO Dick Borgman.

“We stock private brands because name brands do not meet all the needs of U.S. consumers,” Mr. Borgman said. “In an economic downturn, the need for private brand options is even more urgent.”

U.S. tyre makers do not care about the Tier 3 market, the opponents said, and if a quota was placed on Chinese tyres it would take U.S. producers years to begin producing enough Tier 3 tyres to make up the shortfall in demand-even if they wanted to.

“You can't replace Chinese-made Tier 3 tyres with U.S.-made Tier 1 or Tier 2 tyres,” said Ross Kogel Jr., president of Troy, Mich.-based Tire Wholesalers. “That's like saying import restrictions on the Kia Sorento would lead Americans to buy Cadillac Escalades.”

U.S.-made tyres are not competitive in the Tier 3 market, and would not fill the gas created by a Chinese quota, according to Mr. Kogel. “Limiting the number of Chinese tyres available to our business would cause a switch from importing Tier 3 Chinese tyres to importing Tier 3 South Korean-manufactured tyres, not U.S.-made tyres,” he said.

The ITC is scheduled to vote June 18 on whether Chinese tyre imports are disrupting the U.S. tyre market. If the vote is affirmative, the commission will vote on the remedy June 29 and send its report to President Obama July 9. The president's decision on the remedy would be due in mid-September.

Ten members of Congress, most with major tyre plants in their states or districts, appeared at the hearing to make statements in support of the USW petition. They were Sen. Arlen Specter, D-Pa.; Sen. Sherrod Brown, D-Ohio; Sen. Evan Bayh, D-Ind.; Sen. Blanche Lambert Lincoln, D-Ark.; Sen. Robert P. Casey, D-Pa.; Rep. Louise M. Slaughter, D-N.Y.; Rep. Robert B. Aderholt, R-Ala.; Rep. Tom Cole, R-Okla.; Rep. Timothy J. Ryan, D-Ohio; and Rep. Carolyn Kilpatrick, D-Mich.

No members of Congress appeared on behalf of the opponents to the petition.

From Tire Business (A Crain publication)