China, United Steelworkers Union keeps eyes on U.S. tire ruling
By the Associated Press
WASHINGTON — Workers at the Cooper Tire plant in Texarkana used to be busy laborers with big paychecks. But these days the plant, where they used to mix rubber, mold treads and put together tires on a continual basis, sits idle at least two days a week.
The culprit, the United Steelworkers union said, is a surge of cheap Chinese tires—some of them made by China-based Cooper Tire employees—that have hurt the American-made tire business.
The union is urging the Obama administration to impose tariffs on some Chinese tire imports. But it faces crosswinds, not just from Shanghai, but from Springdale, Ark.
Tyson Foods, the poultry and meat giant based in Northwest Arkansas, sees China trade as an opportunity and is wary of greater trade restrictions. Chinese cooked chicken is being blocked from entering the country, and many in the chicken industry fear Chinese retaliation on U.S. agricultural exports.
Last year, Tyson sold $3.8 billion of chicken, beef and pork overseas. Exports to China and sales generated by Tyson operations there totaled 12 percent of the company’s $1.6 billion in international chicken sales.
With 1.3 billion consumers, China can mean huge sales and profits for companies that can crack that market. But for U.S. workers competing with the Chinese, competition can mean wage cuts, job losses, even home foreclosures.
In July, the U.S. International Trade Commission ruled that China has damaged domestic manufacturers by flooding the market with cheap tires. As a result of the commission’s finding, President Barack Obama has until Sept. 17 to decide whether to impose tariffs on certain Chinese tire imports.
His decision will send a signal on how his administration will tackle trade. The union, which fought for Obama’s election in 2008, is counting on Obama to champion its cause.
Since taking office in January, Obama hasn’t established a clear trade stance, according to Clayton Yeutter, a free-trade advocate who represents agricultural clients.
“This is really the first case where the president himself will have to fish or cut bait,” said Yeutter, who served as U.S. trade representative from 1985 to 1989 under President Ronald Reagan and as secretary of agriculture under President George H.W. Bush.
China is the third-largest market for products exported from Arkansas, behind Canada and Mexico, and the volume of goods sent there keeps growing.
Between 2005 and 2007, the value of goods sent from Arkansas to China more than doubled from $144 million to more than $307 million. Goods ranging from musical instruments to soft drinks to artificial fur originating in Arkansas all found their way to China.
Retail giant Wal-Mart Stores Inc. operates 256 stores there, and ships billions of dollars in merchandise stateside from China.
But some industries, notably beef producers and rice growers, have not fared well either because of strict quotas and tariffs on imports or policy decisions coming out of Beijing.
Ironically, though Tyson does a great deal of business with China, Arkansas-grown poultry is currently banned from entering the country, as is chicken from Kentucky and Virginia, because of avian flu cases in those states.
Last week, Arkansas Lt. Gov. Bill Halter traveled to China with lieutenant governors from six other states to encourage the government to open up to imports from those industries.
Speaking by phone Thursday as he rode a bus in Henan province, Halter said Chinese officials from the state and central governments he spoke with were receptive to reopening the country to Arkansas chicken, but rice could prove more difficult.
“It’s a staple of their diet,” he said, “and there is a political sensitivity on the part of China in terms of rice imports.”
It may be harder to get China to drop the old barriers to Arkansas-grown poultry if the U.S. government is putting up new barriers to Chinese tire imports, free-trade advocates say.
While Halter promotes trade in China, the tire makers in Texarkana worry about paying their bills. Their paychecks have been slashed. Their pensions have been frozen, and their health benefits have been cut back.
“A lot of our guys have lost their homes,” said David Boone, president of the Steelworkers Local 752. “A lot of our guys have lost their cars. A lot of our guys have filed for bankruptcy.”
Increasingly, Cooper Tire is shifting its production centers from the U.S. to China.
Cooper’s strategy, outlined in reports with the U.S. Securities and Exchange Commission, was to increase investment in joint ventures in Asia while closing a plant in Albany, Ga., and turning the Texarkana factory into a “flex plant” that produces below capacity unless there is a sudden surge in demand.
Over the next three to five years, the company—which did not participate in the case before the trade commission—plans to invest about $200 million in its Chinese operations.
Cooper representatives declined to comment.
“The North American plants are scaling back, while the Chinese plants are still producing,” Boone said.
As part of the company’s plan to cut costs by $70 million, the workforce in the Texarkana plant was reduced from 1,500 in 2005 to its current 1,200.
In 2006, the plant was shut down up to four days per week.
When the plant switched to a three- and four-day schedule, the average worker’s hours there dropped from between 37 1/2 and 40 hours a week to between 22 1/2 and 24 hours a week.
Though production has picked up a bit in the wake of the Georgia plant’s closing, Boone worries about the future. If things don’t keep improving and if the stream of Chinese imports continues, the Texarkana plant could close down, he predicts. That, he said, won’t leave his workers with similar options near Texarkana. “This is the best job in the Four States Area,” he said.
In December 2008, the union renegotiated its contract with Cooper.
A union worker at the plant makes $23 an hour on average, a rate that is frozen under the terms of the contract. New hires, Boone said, come in at $13 an hour, without a pension or retirement health care, and wages in the factory warehouse have been cut by one-third.
The concessions, Boone said, are worth $30 million over three years.
Boone said the union, which went on strike as recently as 2005, is doing its best to save its members’ jobs.
“We’ve been beat down,” he said.
Under Section 421 of the Trade Act of 1974, which was recognized by China when it entered the World Trade Organization in 2001, the United States can impose tariffs on specific Chinese products if domestic industries are hurt or threatened by large quantities of Chinese imports.
Unlike other trade cases, which allow for tariffs or duties on goods that have been imported unfairly, Section 421 cases allow for a penalty based simply on higher quantities of Chinese goods, not on whether the goods were improperly subsidized or “dumped” onto the U.S. market at bargain-basement prices.
And unlike a dumping case, in which a tariff is decided by the Commerce Department, Section 421 decisions are made by the president, after findings by the Trade Commission and U.S. Trade Representative’s Office.
Former President George W. Bush rejected all four recommendations for tariffs that the Trade Commission sent him on Section 421 cases.
In Obama’s campaign last year, the steelworkers saw a commitment to defend American workers.
“We hope he’s a man of his word,” Boone said. “We need some relief soon.”
Recent statements by Ron Kirk, Obama’s trade representative, seem to indicate he will follow through on the steelworkers’ wishes.
Speaking last month at the Edgar Thomson Plant in Pittsburgh, which has churned out steel since 1875, Kirk said enforcement “can’t be an afterthought. It needs to be the centerpiece of trade policy.”
Yet, proponents of free trade also have hope that Obama will reject attempts to limit trade. At the G-8 summit in Italy in July, Obama signed on to a declaration pledging that member countries will “resist protectionist measures in trade and investment.”
Marguerite Trossevin, a partner at Washington law firm Jochum Shore & Trossevin, who represented Chinese tire importers in the Trade Commission case, said that the U.S. sends mixed signals by scrambling for access to foreign markets while attempting to set a trade cordon around its own borders.
If Obama decides to impose penalties on the Chinese tires, it will “open the floodgates for trade litigation,” Trossevin said. And will China, in return, retaliate by blocking U.S. goods? “You can take it to the bank,” she said.
The result, she predicts, will be job losses far greater than the ones already suffered by the tire industry.
Trossevin said the tire case sets a low bar for Section 421 cases.
Though Chinese tire imports increased 259 percent between 2004 and 2008, they still only have a 17 percent market share in the United States.
“That’s not exactly overwhelming,” Trossevin said.
Trossevin and other members of the American Coalition for Free Trade in Tires argue that the imported passenger-car and light-truck tires from China that are the subject of the case are a different type of tire from the kind made in Texarkana.
The Chinese tires are “entry level” tires, while the tires made at the Arkansas plant are “premium,” according to Tom Prusa, an economics professor at Rutgers University and member of the free-trade coalition.
Prusa said Cooper made the same decision many American companies do—to manufacture cheaper, lower-margin tires abroad, where there are lower overhead costs.
Despite product-specific “irritants,” the trading relationship between China and the United States is on “strong footing,” according to Erin Ennis, a vice president at the U.S.-China Business Council in Washington.
But she said she was looking at Obama’s pending decision on tires “with a wary eye.”
“We want to make sure this isn’t something that any company affected by the recession will look at this as a way to offset lost sales that don’t have anything to do with China.”
As workers at the Cooper plant wait to see whether Obama decides the trade case in their favor, others worry a ruling against imports could have a ripple effect.
“If the president grants relief to the tire workers, it raises the likelihood of—retaliatory is too strong a word—some kind of response that would negatively impact U.S. imports to China,” predicted Yeutter, the former U.S. trade representative.
Yeutter said the notion that the United States and China are headed toward a “trade war” was incorrect. Increased commerce between the two countries, he notes, has the effect of increasing the number of disputes in certain industries.
But Yeutter allowed that there could be a spillover effect.
“The Chinese may be holding off a bit on applying serious or severe import constraints on chicken until they see what happens on tires.”
In China last week, Lt. Gov. Halter said none of the Chinese officials he met with at the ministries of foreign affairs and commerce made any explicit connection between the two cases. But “they made it very clear they’re watching the U.S. determination on tires.”
Source: Texarkana Gazette, September 1, 2009