Last month we spent a long time to analyze tariff, quota and subsidy. Let’s
talk about a real case about tariff-----“tire safeguard case”.
The U.S. International Trade Commission suggested to levying Chinese
exports tires for three consecutive years to 55%, respectively, 45% and 35% ad
valorem special tariffs on June 29, 2009. According to the procedure, Sept. 4,
the Office of the U.S. Trade Representative submitted the final recommendations
of the report on China's exports to the U.S. tire special safeguard case to
U.S. President Barack Obama. On September 11, Obama agreed this suggestion.
American claimed that Chinese tires disrupted the U.S. market. In
addition, it was Chinese tire exports caused the U.S. tire workers unemployed.
Moreover, Consumer tire imports from China, the volume increased by 215%, and
the amount had a 295% growth from 2004 to 2008. Chinese tire damaged the tire
industry in the United States. By imposing this sanction, employment in the
U.S. tire industry grew by 1,200 jobs (Gary Clyde Hufbauer and Sean Lowry atthe Peterson Institute).
However, it also brought side effects. How much did those 1,200 jobs
cost? About $1.1 billion and that’s about $900,000 per job. After we learned
the theory in class, we knew that it is rational and normal to lose money and
efficiency if you want to set a high tariff to protect your industry. In short
term, it did help the workers. But as soon as this tariff expired in 2012 US
workers would lose their jobs again.
What Chinese did to fight back? On September 13, the Ministry of
Commerce in accordance with Chinese laws and rules of the WTO started
Anti-dumping and countervailing review process of automotive products and
chicken products imported from U.S. Just like what we played in class most
people chose to be hawk rather than dove. Nobody can be better off from this game.
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