Trouble Increases as Tire Rolls

l         On June 18, 2009

The U.S. International Trade Commission (ITC) reached by a vote for four to two an affirmative determination that Chinese imports cause or threaten market disruption. Imports of the products in question from China reached $1.79 billion in 2008. The timeline for the case requires that the president decide whether to grant or deny relief to the petitioners by September 17, 2009.

l         On June 29^th, 2009

The USITC voted on the proposed remedies. Four of the commissioners announced that they will propose an additional duty for a three-year period, set at 55 percent ad valorem in the first year, 45 percent ad valorem in the second year, and 35 percent ad valorem in the third year. They also recommend that, if applications are filed, the U.S. Department of Labor and the U.S. Department of Commerce provide expedited consideration of Trade Adjustment Assistance for firms and/or workers that are affected by subject imports. Two commissioners did not find market disruption to exist, and urge that no trade restricting action be taken. They instead urge that the U.S. government be prepared to provide economic adjustment assistance to displaced tire workers.

Dose it really hurt badly? 

According to a tire industrial insider in China, in recently two years, 40% of the tires China produced were exported into the overseas market; of them, one third was shipped into the US market. Last year, the export reached 2.2 billion USD, accounting to 17% of the total tire consumption in America. Moreover, the tires exported to US are mainly applied in the after-service market (or used for repair and replacement market); whereas, the American local made tires were mainly applied in the fields of automobile manufacturing supplies & services. The made-in-China tires are complementary, not competitive to the U.S. products, so that the exported Chinese tires do not really hurt that much to the American tire industry.  

Fan Rende, President of the China Rubber Industry Association, expressed: "as influenced by the global financial crisis, the automobile industry in US are experiencing a recession period, and the market witnessed a sharp decline of automobile production and sales, leading to a decreasing demand of tires and difficult situation for the local tire industries. However, you could not say such a result was cased by the imports of Chinese tires directly."

One representative from domestic WANLI Tire Company expressed that recently, the tax for Chinese exported tire is 4.4%. In 2008 the export of their company to US achieved 200 million USD, if calculated with the rate of 60%, their company will pay a tax of nearly 160 million USD, which would result in giving up the American market finally. 

"The proposed sanction against Chinese tire export to the U.S. market will cause a lose-lose situation on both countries. The restriction of the Chinese tires cannot solve any problem faced by the U.S. tires industry, and further would hurt U.S. tire distributors and consumers", said Mary Xu, deputy secretary general of the China Rubber Industry Association and the leading member of a Chinese tire producers delegation in Washington.

Xu said that the tariffs will hurt the American consumers and cause job loss as well. "This case will influence about 100,000 U.S. employees across the country, including tire sellers, distributors, transporters and logistic companies. More than 25,000 American workers may lose their jobs if the sanction is implemented," Xu said. "And about 100,000 Chinese workers from 20 tire producers will be influenced by the case," she added.

Furthermore, the Tire Industry Association (TIA) in America did not support the steelworkers' petition, instead releasing on June 17, 2009 a position statement declaring that "a reduction of this magnitude in the quantity of Chinese tires imported would itself create a market disruption, and cause very real harm to our member companies and the U.S. consumer."

Influence to the industrial chain

According to the China Rubber Industry Association, due to the world wide financial crisis, the motor industry was shocked badly in USA. Recently, neither the raw material cost nor the labor price could contribute as an advantage for American manufacturers to produce tires. Whereas, comparing with America, China possesses some comparatively advantages in producing tire.

Moreover, those American tire manufactures, aiming at reducing the production cost and global expansion, began to transfer their tire production to the developing countries continuously: utilizing their own technical and capital advantage, along with the resource advantage in the transfer-destination countries, American tire manufacturers establish tire companies or joint-venture enterprises in those developing countries.    

As statistics indicates that there are four American tire companies in China, enjoying various benefit policies and witnessing an increasing output every year. For example, the Goodyear Corporation in Dalian produced four million passenger tires in 2008; to date, the company is enlarging its production sale, which aims to realize a production capability of 5.3 million tires per year. Furthermore, the Goodyear Corporation establishes its Asian-Pacific head office in the city of Shanghai. Cooper Chengshan (Shandong) Tire Co., Ltd. is a joint venture between Cooper Tire and Rubber Company. In 2008, the production capability of truck tire and passenger tire realized 2.4 million and 3.5 million, respectively, with a total sale of 4,128 billion Yuan. All in all, the US and Chinese tire companies should be a win-win cooperators in the global market.

What's more important, the "safeguard" case aroused direct and intense reflection from the related industrial chain enterprises, not only in US, but also in China. Taking the raw material of tire cord fabrics for example, according to the China Chemical Fiber Association, the main fiber for cord fabrics are aramid fiber, polyester fiber, nylon fiber, viscose fiber, wire, glass fiber and so on. Nowadays, the application of nylon cord fabrics reached 70-80% of the total around China; the polyester cord fabric is mainly used in sedan car, while the aramid fiber and wire are mainly applied as a cord material for sedan limousine.  

As Zhu Minru, the president of China National Industrial Textile Association, said: "although the application of cord fabrics in each tire is not too much, however, due to the huge production of motor tires, the cord fabrics manufacture would become an industry of great importance, with large production capability, in the future. Recently, the "safeguard" case has not yet affect the tire cord fabric manufacturers in China. If the result would not be optimistic, the upstream industrial chain would be influenced absolutely."

In 2009, the output of cord fabric in China reached 403,000 tons, with an increase of 9.5% comparing with the previous year. Of them, the nylon cord fabric realized 308,000 tons, and the polyester cord fabric arrived at 79,000 tons, rising by 43% year-on-year. According to the Custom, in 2008, the export of nylon cord fabrics was 83800 tons, with a price of 3807.59 USD/ton; while, the import realized 7500 tons, with a price of 5367.54 USD/ton.    

Source form China Textile Magazine

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