Sixteen Case
Studies On Lean
Manufacturing
From Manufacturing &
Technology News
Workers Are On Their Own To Defend American Jobs From Surging Chinese Imports; American Companies Are Conflicted Because They Now Produce In China
By Richard A. McCormack
richard@manufacturingnews.com
The union representing American tire workers is flying solo in a one of the most important trade cases brought against China in the past decade. In its legal challenge to restrict Chinese tire imports, the United Steelworkers union did not have the backing of U.S. tire producers, almost all of whom are importing tires from China. The Chinese used the absence of any U.S. producer in the International Trade Commission (ITC) case as evidence that Chinese tire imports were not harming the U.S. industry.
While it is not unprecedented for workers to file a trade case without the backing of the companies with whom they are employed, it is rare. Without the American companies involved it raises a troublesome issue that has been festering in the American economy for the past nine years: The interests of American multinational corporations have diverged from the interests of American workers and communities.
Those representing Chinese producers and importers in the ITC “421” China safeguard case (Certain Passenger Vehicle and Light Truck Tires From China, Inv. No. TA-421-7) said that the unwillingness of Goodyear, Michelin, Cooper, Continental, Goodrich and other American producers to join the workers in their petition (which they won) should have caused the Commission to question the validity of their claims. In his opening argument before the ITC on June 2, 2009, attorney Richie Thomas of the firm Squire Sanders, representing the Subcommittee of Tire Producers of the China Chamber of Commerce (and formerly a lawyer working at the ITC), said: “I will close by directing the Commission’s attention to the absence today of the very U.S. producers who are supposed to be experiencing injury from the accused imports. Their absence speaks volumes about the lack of merit of Petitioner’s case.”
Such an argument is not germane to the case, the Steelworkers responded. “They talk about the companies not participating when in fact that is not true,” says Terence Stewart of Stewart and Stewart, the Washington, D.C.-based law firm representing the Steelworkers. “It may be that management of companies did not participate, but workers are the bulk of the company and they are every bit a part of the company as management is.”
Because management controls data, it is often believed that management is the company. But U.S. trade laws have been written with the understanding that workers’ interests could diverge from those of management. “Under the statute, it doesn’t matter why [management] didn’t show up,” says Stewart. “The people on the firing lines losing their jobs were the people who stood up and asked the government to do an accounting of the facts to see if they were entitled to a remedy under the statute.”
Such a situation was foreseen more than 50 years ago when House Ways and Means Committee Chairman Wilbur Mills (D-Ark.) realized that American companies owning overseas production might be conflicted in trade cases. In a post-hearing brief submitted to the ITC, Stewart included a transcript from a 1958 Ways and Means Committee hearing with then Tariff Commission Chairman Edgar Brossard. Said Rep. Mills: “I can conceive of a situation wherein only the people working for the particular industry might be concerned in an investigation being made of whether imports were affecting that industry because the management of the industry itself might have interests both abroad and here, the interests here being a very minor part of the overall operation, but a very significant interest to those working in that very minor part.” Brossard responded: “Yes, that is right.”
The only way for the government, then, to objectively determine if imports were harming those workers was for management to provide the necessary information on imports, sales, marketing and production. Mills did this by including a provision in the Trade Expansion Act of 1958 that gives the government the power to subpoena companies to provide it with proprietary market data.
That is what happened in the USW’s 421 tire case with China. Every U.S. tire producer complied with the ITC request for data. That data disclosed that seven of 10 U.S. producers have opened factories in China. One out of every six tires sold by those companies is made in China. Moreover, Chinese tire imports into the United States surged by 295 percent over the past four years, from 14.6 million tires in 2004 to 46 million tires in 2008. During those same five years, U.S. production declined from 218 million tires to 160 million.
In a 4 – 2 vote, the ITC ruled in favor of the Steelworkers, and on June 30 four commissioners recommended that President Obama adopt a three-year tariff on Chinese tire imports, starting at 55 percent the first year, 45 percent the second year and 35 percent the third. Obama will decide by September 17 on whether to accept the ITC’s tariff recommendations.
The unwillingness of U.S. companies to back the Steelworkers case raised another issue during the hearing. ITC Commissioner Charlotte Lane asked USW president Leo Gerard why U.S. producers did not join the petition. Gerard replied: “A number of them aren’t here because they also have facilities in China…To be very blunt, a number of them have said that they’re concerned about Chinese retaliation. Period. End of story….Fundamentally, I’m both disheartened and angry about that…America has gotten to the point where domestic producers are intimidated by another country.” Gerard further stated that he was not surprised by the unwillingness of the companies to participate in the petition “because I’ve had to deal with that from a number of other producers in the glass industry, in auto parts industries, who have come to the union and asked us to take their case because they’re intimidated by that environment. I think the fact that they’re not here speaks volumes.”
Gerard’s response irked representatives of the Chinese tire company involved in complaint. “This is an unfounded accusation,” claimed Duane Layton of Mayer Brown LLP and counsel to GITI Tire China Investment Co. “Are you going to throw out all of the evidence because Leo Gerard thinks that some company official once told him that they are afraid of retaliation? If you really think that is true, then the ITC should make Gerard disclose under oath those company officials who said that and then subpoena them to come in and state it on the record.”
In its post hearing submission to the ITC, GITI said that “we are headed down a very slippery slope if the Commission is willing to throw out vast amounts of record evidence that points to no injury because a witness at a hearing claims to have been told by a number of U.S. producers ‘that they’re concerned about Chinese [government] retaliation.’ ”
During the hearing, counsel for the Steelworkers Stewart downplayed Gerard’s statement, saying that “at the end of the day, I respectfully suggest it is not a relevant consideration” to the outcome of the case.
Manufacturing & Technology News asked Michelin North America, Cooper Tires and Goodyear why they did not support the United Steelworkers in their 421 case. All provided generic responses. “Goodyear supports fair and free trade and will abide by the President’s decision on the matter, whatever that decision is,” according to a statement. “Cooper will support the government’s final decision and intends to cooperate fully with its recommendation,” said the Findlay, Ohio-based company. “Michelin North America agrees that existing U.S. trade laws should be enforced,” said the company on June 30.
The Steelworkers did not convince two of the four ITC commissioners that Chinese imports caused the loss of 5,200 jobs and the U.S. production decline of 52 million tires. Another three major factories are expected to be shut down this year. Commissioners Daniel Pearson and Deanna Tanner Okun concluded that Chinese tire imports “have not been a significant cause of market disruption. Any trade-restricting remedy will not benefit the domestic tire industry, its workers, the broader U.S. economy and society as a whole.”
The Chinese tire importers, retailers and producers said that American producers made a business decision to close their U.S. plants well before Chinese imports started to surge into the U.S. market. They also claim that a remedy such as an import tariff or quota will not lead to investment in American production, nor result in the opening of closed factories or in the hiring of additional American workers.
“When Leo Gerard said he needed a window of relief to have a sustainable period to resurrect the low-cost segment of the tire market – get real,” says GITI Tire legal counsel Layton, who worked as senior counsel at the Department of Commerce from 1994 to 1999. “What this industry needs is a window of innovation and investment,” which a tariff does not provide. “When was there a technological innovation in tire production in this country?” he asks. “The radial tire was many, many years ago.”
Layton added: “At no time during this proceeding have we said screw the workers. What we tried to do is deal with reality and in terms of a remedy, try to do something that will do the workers some good. A tariff may make Leo Gerard and his lawyers feel good but it won’t do their workers any good because they’ll import those tires from Venezuelan, Korea or Poland.”
In its final ITC comments on a possible remedy, GITI stated that the U. S. companies currently importing low-cost Chinese tires are the ones that will be hurt by the tariffs. Duties on these imports “will largely put an end to these sales and the profits they generate for U.S. tire producers,” says the GITI submission. “Lower profits will limit the ability of these U.S. tire producers to expand and improve their production of premium tires in the United States. U.S. tire producers, with a surprising degree of unanimity, have decided that it is in their business interest to outsource low-end tires to low-cost countries.”
A better approach to solving the Chinese tire import problem would be to enter into an agreement with the Chinese government that requires Chinese tire manufacturers to comply with specific labor and environmental standards, said GITI.
The USW did not agree. “The tariffs voted by the commissioners should remedy the market disruptive surge in Chinese tire imports that have caused harm to the domestic industry,” said Steelworkers president Gerard.
Provide us with a comment on this article.
We'll notify you as issues and free stories like this one appear on this site. Sign up for a content-rich, e-mail newsletter. (You will NEVER receive spam.)
Please consider subscribing to Manufacturing & Technology News. You will have access to all back issues dating to 1998, plus receive the current issue electronically and via regular mail. It is all original reporting on the most important stories facing U.S. industry. No advertising. The cost of a new subscription is $395 per year.