July 30, 2015    Volume 22, No. 9

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Steelworkers Union Wins Tire Case As Chinese Tires Flood U.S. Market


By Richard A. McCormack
richard@manufacturingnews.com

The U.S. International Trade Commission (ITC) has ruled that China is dumping tens of millions of subsidized automobile tires into the U.S. market, displacing U.S. production and American workers.

In a three-three ruling of the six commissioners in which a tie goes to the petitioner, the United Steelworkers (USW) won the first trade case submitted to the federal government solely by a union without any American companies formally participating. The three democrats on the Trade Commission (Pinkert, Williamson and Schmidtlein) voted in favor of the USW petition, while the three republicans (Broadbent, Johanson and Keiff) voted against. The republicans based their decision partly on the fact that the U.S. industry has been increasing its operating margins even though it is losing market share to Chinese imports. There was also reference to the fact that no U.S. tire producer joined the petition.

President Obama recently signed legislation (Leveling the Playing Field Act) as part of Trade Promotion Authority directing the USITC to consider factors other than an industry's profitability in determining harm by subsidized imports. Profitability should not be the only indicator of an industry's health since it can be increased by laying off workers, reducing U.S. production in favor of cheaper offshore locations, sourcing less expensive inputs, and slashing spending on capital equipment and R&D. The new law states that the USITC "shall not determine that there is no material injury or threat of material injury to a domestic industry from imports merely because that industry is profitable or its performance has recently improved."

On the favorable USITC tire ruling, USW President Leo Gerard said that "increasingly, the question of whether our trade laws are actually going to be enforced is being left to the workers, as companies and our government are either conflicted or have different priorities." Others involved in the case say American companies tacitly approved the filing, but felt compelled to protect their investments in China by not offending the Chinese government. The trade laws were specifically written decades ago to allow unions to file trade cases in anticipation of the current conflicts caused by globalization of American corporations.

But there was not a great sense of victory among the workers. "We're fighting rear-guard battles," said one union rep. "A high percentage of the work we're doing is rear-guard activity. There is a daunting realization that these victories are fewer and not as large as one would hope for them to be."

The United States is being inundated with Chinese tires, according to an investigation completed by the USITC.

American consumers purchased a total of 295 million tires in 2013, but U.S.-based producers accounted for only 43 percent of the U.S. tire market, down from 50 percent market share in 2011 when the U.S. industry produced 156 million tires. In 2013, the industry produced 142 million tires.

Chinese tire imports into the United States rose from 24.6 million in 2011 (or 8.8 percent of the U.S. market) to 51 million tires in 2013 (17.2 percent of the U.S. market). Chinese tire imports increased by 107 percent during this period, "which was far greater than the 5.9 percent rise in apparent U.S. consumption during that time," says the USITC in a report on the tire industry from 2014. The Chinese share of the U.S. market, "came mostly at the expense of the domestic industry," USITC added. "The domestic industry was losing market share to [Chinese] imports in an expanding market."

From 2011 to 2013, U.S. tire production capacity decreased from 166.4 million tires to 162.7 million tires. Over that period, capacity utilization declined from 93.6 percent to 87.2 percent. The number of production workers fell from 33,390 in 2011 to 29,033 in 2013; and hours worked declined from 66.7 million in 2011 to 58.1 million in 2013. R&D declined slightly from $225 million in 2011 to $221.6 million in 2013.

Nevertheless, the industry's operating income increased by 33.4 percent between 2011 to 2013, from $1.07 billion in 2011 to $1.37 billion in 2012 and to $1.42 billion in 2013. Operating margins increased from 8 percent in 2011 to 10.4 percent in 2012 and to 11.2 percent in 2013.

Meanwhile, the Chinese industry increased its production of tires by 27.7 percent between 2011 and 2013, from 313 million to 400 million tires. "Production capacity in China is projected to be 421 million tires in 2014 and 444 million tires in 2015," notes the ITC.

In 2013, the Chinese tire industry had excess capacity of 72 million tires. The projected growth in the Chinese market "is not commensurate with their projected increase in capacity," which means that most Chinese producers have an "increasing focus on the U.S. market," said the ITC.

In 2013, the United States was the recipient of 31 percent of all Chinese tire exports. While Chinese exports to the United States doubled between 2011 and 2013, its exports to all other markets "increased only 10 percent during that time," says the ITC. During that period, Brazil, Turkey, India, Colombia and Egypt placed antidumping duty orders on Chinese tires.

The ITC said Chinese producers benefit from numerous government subsidy programs including:

  • Preferential lending programs;

  • Export buyers' credits from state-owned banks;

  • Export sellers' credits from state-owned banks;

  • Export credit insurance subsidies;

  • Export credit guarantees;

  • Provision of goods and services for less than adequate remuneration;

  • Direct tax exemptions and reductions;

  • Indirect tax exemptions and reductions; and

  • Grants.

U.S. Tire Production Is Fading Away:

  • 2011 U.S. Tire Consumption: 277 Million
  • 2013 U.S. Tire Consumption: 295 Million
  • 2011 U.S. Tire Production: 156 Million
  • 2013 U.S. Tire Production: 142 Million
  • 2011 Chinese Tire Production: 313 Million
  • 2013 Chinese Tire Production: 400 Million
  • 2011 Chinese Tire Imports Into U.S.: 24.6 Million
  • 2013 Chinese Tire Imports Into U.S.: 51 Million
  • 2013 Chinese Tire Overcapacity: 72 Million


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