July 27, 2009

The Honorable Ron Kirk
United States Trade Representative
600 17th Street, N.W.
Washington, D.C. 20508

Dear Ambassador Kirk:

These comments are submitted by CITAC on behalf of consuming industries in the United States. A wide variety of consuming industries would be directly or indirectly affected by trade restrictions on consumer tires. We urge you and the President to make sure that the interests of consuming industries, and individual consumers are fully considered in determining the national economic interest.

Under the statute, the President is free to modify, accept or reject the relief recommended by the ITC majority, and in particular may deny relief if “the President finds that the taking of such action would have an adverse impact on the United States economy clearly greater than the benefits of such action.” 19 U.S.C. § 2451(k)(2). Because the recommended tariffs will result in losses to consumers and little if any gains to workers in the tire industry, the statute plainly allows the President to deny relief in the interest of the “United States economy.” The President has the responsibility to consider the interests of the entire country.

In this case, the ITC-recommended remedies would effectively eliminate low-cost Chinese tires from the U.S. market for the three-year period of relief. The absence of tires from China in the market will raise costs to downstream consuming industries, including automobile manufacturers, will limit consumer choices and affect most seriously those with the fewest resources. Thus, these tariffs will be the most regressive of taxes. Consumers will purchase fewer tires, which will not benefit U.S. tire manufacturers or their workers. The loss of tire sales will also eliminate jobs in industries such as tire wholesalers and distributors employing many thousands of U.S. workers. Many aftermarket tire dealers are small businesses, the backbone of employment in the United States. At this time, we must do better than to sacrifice small businesses to the demands of a few workers.

If consumer losses are to be avoided, tire imports must shift from China to other low-cost countries. Yet the Section 421 statute was not intended to shift production from China to other countries, but to allow U.S. industries a period of time to adjust to Chinese competition. The prohibitive tariffs proposed by the ITC will not and cannot accomplish this objective.

In a Section 421 case, there is no issue of unfair trade. Because the market share of tire imports from China have taken a small portion of the United States market, there is little need for a period of “adjustment.” At the end of the three-year period of relief, either tire imports from countries other than China will have increased, or demand for low-end tires will have built up— there is no prospect that the U.S. industry would satisfy this need. There is no evidence of which we are aware that low-end tire production would shift to the United States in the three-year relief period, and such a possibility must be considered remote.

CITAC is also very concerned that relief in this case will lead to an avalanche of Section 421 cases, safeguard cases and potentially other trade remedy cases. Many businesses well beyond tires have integrated themselves into the global economy. Consumers need choices and low prices, especially at this time. Efforts to revitalize American manufacturing must be based on creative and constructive ideas that build on integration with other countries, not on isolating them. Providing relief in this case would send a signal that the United States supports, even in marginal cases, protectionist responses to imports. Other countries can be expected to respond in kind, resulting in the “beggar thy neighbor” downward spiral that will kill global economic growth and replay the trade disaster of the 1930s.

CITAC supports enforcement of U.S. trade rights of exporters and importers alike. Both are critical to industrial and commercial growth of the U.S. economy; this case can send the message that the U.S. will succeed by engagement and not isolation. We look to your leadership to provide the correct response for the entire economy and the American people.