Can Doing What Seems to Be the Right Thing Turn Out to Be the Wrong Thing?
In Promoting Protectionism, American Labor May Be Putting US Workers at Risk
Leo Gerard of the United Steelworkers union is one of America's most progressive and outspoken labor leaders. I met him at a Cornell University conference that brought environmental organizations and labor unions together to fuse a forward looking consensus on the need for green jobs as key to the transformation of our declining industrial base.
A union blog speaks of us being in the best of times and the worst of times. The best because we finally have a Democratic president sensitive to labor concerns. The worst because American workers are up against hard times as unemployment grows because of a financial crisis that labor had no role in. Among the trends cited: "30 years of stagnant and declining wages while workers' productivity climbed by 75%; lower take home pay than in 1973; Yawning inequality."
Yet for all the union's activism and militancy, it has also been looking for someone to blame for this situation. Rather than focus on Wall Street's predatory practices or financing job outsourcing, it has turned its anger on workers on the other side of the world. China has become "the enemy." It is seeking protectionism in the belief that that can save American jobs.
Their target is tire companies in China that manufacture the least expensive tires on the market for cars and light trucks and sell them in America. The union argues that its imports are stealing American jobs and "disrupting the market" and has petitioned a government body, the International Trade Commission (ITC), to slap limits on them.
Bloomberg News reports: "The Chinese import surge has been a significant factor that has led to the idling of factories," Leo Gerard, president of the United Steelworkers, told reporters. The union represents about 15,000 tire workers at 13 plants including those owned by Bridgestone Corp. and Goodyear Tire and Rubber Co."
The ITC, set up under our trade laws, has now, by a 4-2 vote, agreed with the union and then went even further recommending stiff tariffs on all Chinese made tires in a remedy sent to President Obama. Perhaps unknowingly, the ITC decision also puts tariffs on Goodyear tires made in China, potentially hurting a US company as well. (1 out of every 6 tires manufactured by US firms are made in China!)
Explains the news service: "The president has the final decision over whether to take action or disregard the commission's recommendation, and that will be due in September."
Gerard sees the decision as a big victory but the logic is illogical and illustrates the dilemma of trying to fight our economic decline in an age of globalization by taking refuge in protectionist policies that often lead to counter attacks, in this case, from the one country that has kept the US economy alive by buying our treasury bills and debt.
Without China's financial support, we would be in far more dire straits, perhaps a deeper depression. Everyone knows that.
What's most revealing is that that none of the US-based tire companies have joined the union in this China bashing. If their business was at risk from predatory trade practices from China, they would speak up, but they know that tire imports from China constitute only 11% by value of the US tire market.
Another reason for the silence of US companies: they had long ago stopped producing lower-cost so-called "Tier 3" tires and instead opted to manufacture premium more expensive and more profitable products which are not in the same category, hence, not directly competitive. Some of these companies benefit as well because they import the third tier economy-priced tires from China for their own US distribution networks.
When US brands got out of the cheaper so-called replacement-tire low-profit market, China got into it, including working through these US manufacturers' American distribution networks and dealership which hire thousands of American workers. They service cost-conscious US consumers who can't afford higher priced brands. These consumer will be hurt if the Steelworkers and ITC prevail in this wrong-headed move.
And who are they? They are the union's own constituency, American workers who are coping with high unemployment levels and all sorts of economic distress because of the collapse of our financial system. Why victimize them further?
Stopping Chinese firms from manufacturing low-cost tires and selling them here will not create new jobs in America or turn the economy around.
Then, why is the union advocating it? Clearly to do something, to be perceived symbolically as fighting for its members by taking a popular "Buy America" stand even though there are no comparable American tires at that price point that are made here or even sold here.
The likely outcome is that if Chinese made tires are sanctioned, imports of tires made in Venezuela and other countries will replace them. Who will benefit? Not American workers!
Instead the Chinese work force with 20 million out of work because of the economic crisis will face even more painful job losses that will likely enrage them, and then put pressure on the Chinese government to strike back, perhaps with more pressure on the American dollar, or other US businesses there.
As the saying goes, what's good for the goose is good for the gander.
Many in China already resent US economic bullying and blame Wall Street for selling them junk loans and infected financial products that have caused vast economic losses. (Even as the US blames China for selling us infected peanuts or risky toys.)
To be honest, there is plenty to find fault with on all sides.
China-made tires meet US safety standards. If these more affordable tires go up in price, consumers would likely replace them less, leading to real safety worries.
So, let's stop reducing this problem to black and white, right and wrong, to demonize the "foreigners" with whom we are, like it or not, in an economically co-dependent relationship. In this industry there are both American owned firms in China and Chinese firms doing business in America.
The Steelworkers deserve support in their fight for economic fairness and new laws to help them organize. They deserve respect for their advocacy of an environmentally sustainable economy.
Their ‘save our tires' tactic, however, is a throw back, a step in the wrong direction and likely to hurt all sides in our economic relationships. We need each other to achieve economic stability.
Instead of gaining jobs for Americans, this measure could lose them. 500 US businesses could be hurt if this "remedy" goes through. Also, bear in mind, those US tire plants that were closed down before the Chinese imports from China began.
We need to ask: whom does protectionism really protect? When things are so bad, why make them worse?