Sino-US trade war started from tires

Tires, broilers, cars, coated paper, seamless steel tubes, oil well pipes... How did President Barack Obama decide whether Zhu Xiaojun, a formulator of a tire enterprise in Zhejiang, China, would continue to work or return to his hometown of citrus?

At least for now, Zhu Xiaojun doesn’t need to worry about this year’s citrus harvest—the more than a hundred orange groves in his hometown of Zhejiang Province, is another major source of income other than his working income.

“The work is fairly stable,” said the tire worker of Hangzhou Zhongce Rubber Co., Ltd. (hereinafter referred to as “Zhejiang Rubber”). After receiving an interview with the Postco reporter, he will rush to "middle class" - from 2 pm to 10 pm - if possible, he also hopes to increase the children's class, "so that I can get more money."

After the Obama administration announced that it had taken special safeguard measures for Chinese exports of American tire products, Zhu Xiaojun once worried that he would lose the work he had engaged in for nearly 9 years. However, the company immediately promised "no pay cuts, no layoffs" and relieved him.

In the autumn afternoon, the sun lazily spilled into the Zhongce factory on Haixi Road No. 1, Hangzhou. Workers dressed in red overalls came in and out. They looked relaxed and busy as usual. The wave of special protection originating from the other side of the ocean seems to be far away from this state-owned tire company in eastern China.

But in fact, the seemingly calm Sino-Rice rubber is in the center of the storm. As China's largest rubber industrial enterprise and Zhejiang's largest exporter of tires to the United States, Zhongce Rubber exported more than 100 million U.S. dollars worth of tires to the U.S. last year, and it directly supplied 1,000 workers to U.S. tires.

"The U.S. market after the special security case is like the door is still open, but the threshold is so high that there is only one gap left. How do you get in?" Shen Jinrong, chairman and general manager of Zhongce Rubber, was worried. "Now, China policy is for the United States." The export volume has been almost zero."

Like him, Yao Jian, spokesman of the Ministry of Commerce. Yao Jian admitted frankly at a forum the day before yesterday that the rising tide of trade protectionism that has emerged in the world is causing China, the world’s third-largest trading entity, and the second-largest exporter country to suffer. “Especially in the United States, trade frictions with China are increasing.” Statistics show that from January to September this year, the United States initiated 14 trade remedy investigations against China, although the number dropped by 6% year-on-year, but the total amount involved reached 5.84 billion US dollars, a year-on-year increase. It rose 639%. Moreover, in September this year, the Consumer Product Safety Commission of the United States recalled a total of 15 products in 7 countries and regions, of which Chinese products were recalled 6 times, accounting for 40% of the total number of recalled products, ranking first.

From bursting with confidence to worst plan

For several months, Zhu Xiaojun spent his time in the middle of the night. The “butterfly wings” that mobilized the emotions of the most basic employees of this Chinese company are the tire special security investigations on the other side of the ocean. "I knew about the tire special insurance about July, and I was thinking about what I would do if I didn't work?" he said.

Zhu Xiaojun, 37, is the operator of the molding workshop of Zhongqi Rubber Meridian Plant. For him who entered the factory in 2001, there are too many things that this familiar work means.

Zhu Xiaojun and his wife who worked in China policy lived in a room just 9m away from the factory. The monthly rent was more than 400 yuan. Except for rent, the couple's total salary of about 4,000 yuan/month has to pay for tuition fees for the children of the first year of righteous thoughts. "Even if you don't count tuition, the monthly expenses are more than 2,000 yuan," he said.

However, the calm of life was still broken by the tire "special security case" - Zhu Xiaojun's workshops are all produced in the United States. Every day, more than 200 tires passed by him are involved in the case. "There are fewer jobs, people must be reduced, and I am not young, and it is very difficult to find such a stable job." He said that if they are unemployed, Hangzhou will certainly not be able to continue and they will have to go home and continue planting citrus.

Zhu Xiaojun's hometown is Huashu Town, Kecheng District, Quzhou, in the west of Zhejiang. In the area known for producing citrus, he has an orange grove with an annual output of over ten thousand pounds. "But you also know that farmers are looking for food and they only sold a few thousand dollars last year," he said. "So, the biggest hope at that time was that the 'special protection case' should not be passed."

Zhongce Rubber also does not want the “special protection case” to pass. “Our annual export volume to the United States is 5% of the annual output. Based on this calculation, at least 1,000 of the more than 20,000 employees will be implicated,” Shen Jinrong said. “The effect is self-evident.”

Compared to Zhu Xiaojun, Zhongce Rubber was aware of the “special protection case” earlier. On April 20th, the 1.2 million-strong US Steel Workers Union (USW) applied to the US International Trade Commission (ITC) to claim that 46 million Chinese tires enter the United States each year, making the US tire industry “overwhelmed” and recommending that China's imported tires are subject to quota restrictions of 21 million per year. On the 29th of the month, ITC issued an announcement to investigate the special protection of passenger cars and light truck tires made in China. On the 30th, Zhongce Rubber dispatched representatives to participate in briefings on cases organized by the Fair Trade Bureau of the Ministry of Commerce.

Xu Youming, manager of Chinachem Rubber Legal Affairs Department, went through this defense. "At that time, the chairman of the board told me that this work is of the utmost importance. Others can put it first, but this should be done at all costs," he told the Morning Post reporter.

During the process of responding, China organized two delegations to participate in the US Hearing. The previous time on June 2th, the host was ITC. The result was: On the 18th of the same month, ITC determined that the damage was established with a 4 to 2 vote; the last time - and the most widely known one on August 7th. Office of the United States Trade Representative (USTR).

"I have participated in the two hearings. The process and content of the defense are very similar." Xu Youming said, "Comparatively, the second time I prepared more fully, my confidence was even better."

Unlike the first time, nine Chinese tire industry delegations consisting of six major tire companies set foot on the "US trip." On the evening of August 3, it arrived in Washington and the following day it went on non-stop to visit the US Department of Commerce, the Ministry of Finance, the Ministry of Labor, the State Department and the USTR. "Mainly lobbying, directly to the United States is strongly opposed to the tires of the special security case calls to the United States important departments." Xu Youming said.

"In those days, I returned to the room early in the morning and only slept for 3 hours a day," he recalled. He had "spirited" details in his mind and hoped for more powerful counterattacks.

It was almost a period of “extreme excitement”, not only because of the mission undertaken, but also because of the confidence of all parties in the United States. Xu Youming said that when visiting the US State Department, the other party said something that impressed him: "You have come in time, we want to hear the voice of Chinese manufacturers." The U.S. Department of Commerce "received seven or eight people." The attitude is more enthusiastic and there are many problems. It seems more willing to listen to us.” At the hearing, a total of 9 groups of delegations spoke, 6 groups expressed opposition to the special insurance, 2 groups supported, and 1 group did not make a clear statement.

"Confidence" - Xu Youming chose such a word: "Including me, experts in the industry and Chinese tire companies are optimistic that the U.S. government will not take special safeguard measures based on the voice and reaction of all parties."

However, Shen Jinrong, who claims to be "more conservative," has done a "worst plan." He introduced that China Strategic Rubber has long established an emergency plan, and at the same time, it began to change its strategy at the beginning of the “special protection case”, including opening up new markets, expanding domestic sales, and adjusting product mix to reduce the number of tires within the scope of special protection. Production and so on.

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The ultimate victim is the American

However, "confident confidence" did not stop the "worst plan".

On the evening of September 11th, US White Spokesman Robert Gibbs announced on behalf of Obama that from the 26th onwards, China’s passenger and light truck tires for the US will be levied 35% and 30% respectively in the next three years. And 25% ad valorem tariff. This is the first time that the President of the United States has used special safeguard measures for imported products from China. "At that time, my heart was cold, and my initial confidence was a little more than a hundred times cold and heavy." Xu Youming said.

At that time, China was already on the morning of September 12th, and this could be a relaxing Saturday. After further understanding of the situation through international long-distance, Xu Youming quickly reported to Chairman Shen Jinrong. At this time, Shen Jinrong, who had received the news, had rushed back to the factory and began to communicate with relevant associations on how to deal with it, as well as drafting protest letters.

At 11 o'clock, Zhongce Rubber Conference Room was full of people. At the emergency meeting, Shen Jinrong stated that China Strategic has promised to “not lay off staff and not reduce pay, and it will not have any impact on staff due to special insurance”. He asked his staff to send this information to all 20,000 employees by 19:00.

Zhu Xiaojun knew about the news passed by the special security agency around 12 noon. “At that time, notices were posted on the workshop,” but the company’s promise made him practical. “From this period of time, the company has made a promise and it paid 3 times the salary for overtime on National Day.” He said, “There is no change in life and work, and the income is even higher than in October last year.” Zhu Xiaojun’s colleague Wang Heping said: He took a rest and found out through the company's text message. He also called a few friends to take a nap in a nearby restaurant.

However, the normal life of the workers does not mean that Sinochem rubber is still on track. Shen Jinrong revealed that up till now, apart from a small number of orders and endorsements from some US tire dealers, China Strategic’s export volume to the United States has been almost zero, which is in sharp contrast to the beginning of the “special security case” - the United States is ready to China After the introduction of punitive tariffs on tires, US dealers began to make large quantities of stocks because they were concerned that the “special security case” could not buy Chinese tires after implementation, and corporate orders have soared.

Although Barack Obama’s final award rate is 10 percentage points lower than the ITC's proposal, there is no substantive difference between China Strategic and Chinese tire companies. "Acquiring a tax rate of 35% is equivalent to selling $40.5 worth of tires that would have been priced at $30. It will lose market competitiveness." Shen Jinrong said.

"High cost performance" has always been a "weapon" for Chinese tire companies in the US market. "It's not a little higher, but it's too much." - "Quality completely meets or exceeds US standards, and the price is a lot cheaper." "The U.S. market after the special protection looks like the door is still open, but the threshold is so high that it can't cross it. It's no different from closing it completely." Shen Jinrong said, "The Chinese tires are no matter how cheap they are, they can't be cheaper than 35%."

The obstruction of the U.S. market may further strengthen Sinochem Rubber's efforts to open up the domestic market. However, it has to face the reality that the fiercely competitive domestic market will stifle even more.

Fan Rende, president of the China Rubber Industry Association, said that last year, China’s tire exports to the United States were worth about US$2.2 billion, and annual tire exports accounted for more than 40% of total production. If half of American tires were sold, that means 12% of the remaining capacity. According to incomplete statistics, there are about 400 companies in the domestic tire industry above designated size. Up to now, with the world's fourth-largest tire giant German horse announced at the end of last year to build factories in China, the world's top ten giant foreign tire companies all fall into China, the domestic tire industry was overcapacity. "This 12% export to domestic sales of tire capacity will undoubtedly worsen the overcapacity in China's tire industry."

On the other hand, Fan Rende said that “because of the financial crisis, China’s tire industry’s major economic indicators have fallen by two figures year-on-year and 1/3 of companies have suffered losses this year. If tire exports fall by about 12%, even the rubber industry’s The growth rate will drop by 5-6 percentage points."

The United States tire market has also been changed. "As the 'country on wheels', the most affected are US dealers and consumers," Shen Jinrong said. From this point of view, Hamilton Chan, president of Unlimited Power, a California-based importer of Sinochem Rubber, agrees: “The United States will have more difficulties.”

“Under the backdrop of the economic downturn in the United States, giving up Chinese tires that are inexpensive and affordable is a blow for consumers,” Hamilton told the Morning Post reporter. After the “special security case” was passed, the U.S. maintenance market – which is also the product of China’s involvement The "main battlefield" - the average price of tires has risen by 10%, and it is expected that it will rise at least 10% by the end of the year. “U.S. consumers are the ultimate buyers and they are very disgusted. This will cause many low-income families to be forced to postpone the replacement of old tires. This poses a security risk.” Hamilton said that he was on the edge of a small tire shop that was engaged in the repair business because The customer has been substantially reduced and has been losing money.

What is even more difficult is the US tire dealers because it is a punitive duty-bearer. A large number of US tire dealers have tire production and sales transactions with China. “The US dealers purchase tires from China because US companies have already given up the production of this small profit product in the country. Even if special insurance is implemented, it is impossible for US manufacturers to reopen the production line. , But it is forcing distributors to find alternatives in other countries." Hamilton said that Obama's "exchange behavior" exchanged is the dealer's shuffle and large fall.

Hamilton said that although his business conditions are still good, but the volume of business has also dropped by 30%, "It is now the stage for US dealers to survive, and it is estimated that there will be one-fourth of the final closure."

Shen Jinrong revealed that recently, almost every US dealer who has business dealings with China Strategic has called or came to the company in person. He hopes to make profits and give points. "But I can do nothing. Otherwise, it will fall on a low-cost basis. What we call is anti-dumping." Baton."

I hope Obama will change his mind

After being “special protection”, sticking to or withdrawing from the US market is a decision that Chinese tire companies must make.

Shen Jinrong firmly steadfastly stated: "We will never give up." Next, in addition to "continue to increase market expansion efforts for products that have not been included in the scope of special safeguards" in the US market that has been deeply cultivated for more than 20 years, more specific measures are being Rong used "trade secrets" as his secret.

The successful development of China Strategic seems to be supported by its "contrarian" move. On the 16th of last month, China Strategic spent RMB 1.5 billion to launch its annual production of 13.8 million passenger car radial tires at its production base in Xiasha, Hangzhou. Upon completion, Xiasha Base will become one of the world's largest passenger car radial tire monomer plants. Surprisingly, the tires produced by this base are all included in this special protection case. "I always believe that something competitive is not a U.S. market that can prevent it." Shen Jinrong explained.

"In fact, I am more worried about other countries in following the special case of tire protection," said Xu Youming. A few days after the ruling on the “special security case” for tires, Argentina announced anti-dumping measures on bicycle rubber tires imported from China and other Asian countries; before that, Brazil decided to use certain types of cars imported from China starting from September 9. Tire levies a surcharge of US$0.75 per kg for a period of five years. "Although India has terminated its investigation of Chinese tires, it does not rule out similar actions in other countries," he said.

At present, Zhongce Rubber exports to more than 160 countries and regions. According to the principle of consistency of the WTO, any member of the member side can investigate the special safeguard measures taken by the other party's industry, and other members can directly quote it from the other party without further investigation. "This is the threat of the special safeguard case." . Zhang Handong, director of Zhejiang International Trade Research Center, also stated that the behavior of the United States has set a very bad precedent. The consequence of this is that Chinese tire companies, including China Strategic, will face an overall stagnation of their exports.

Xu Youming continued to be busy with “anti-special protection”. “The next step is more of the work of industry associations and governments, but what we need to do will definitely work very hard.” On September 14, regarding the “special security case”, China had requested consultations with the US under the WTO dispute settlement mechanism. “Without negotiations within the 60-day period, China may file a complaint with the WTO.” Xu Youming said, “But from a procedural point of view, the complaint will be very long, for about 3 years. Even if we win, then the United States will implement 3 years in China. Punitive tariffs have passed."

In comparison, what Xu Youming can directly participate in now is how to make Obama change his mind. US law stipulates that the president has the absolute power to repeal this measure 6 months after the implementation of the special safeguard. “We noticed that in the ordering document signed by Obama there is such a statement: 'The US will implement its measures six months after the implementation of the measures. The economic and employment impacts of both China and the United States are assessed.' This leaves the possibility that Obama may change his attitude after 6 months."

“I'm collecting materials for the evaluation after 6 months.” Xu Youming said, including the “no surge” in Chinese tire sales to the US over the past few years; the increase in Chinese tires is due to the US’s “transition of importing countries”. The impact of the "Special Protection Case" on Chinese companies, etc.

“The special insurance will not bring substantial improvement to the employment and tire industry in the United States,” said Hamilton, the US importer of China Strategic, who still hopes to cooperate with the former and build its sales network in the US market. Thomas Plusa, a professor of economics at Rutgers University in the United States, warned that with the use of special safeguards, the United States will lose 25 jobs each time it saves one job. As a result, 25,000 jobs will be lost.

On October 31, Michelin North America closed one of the eight plants that produced tires for passenger cars and light truck tires - the BF Goodrich tire factory in Union City, Tennessee, which added 850 unemployed people. The U.S. Steel Workers Association and the Tyre Import and Export Association stated that since the implementation of the special safeguard, the American tire factory has not expanded its employees. They even suspect that American tire companies will divert their tires from Southeast Asia to the United States so that they will not benefit the native tire workers in the United States.

Obviously, the negative impact of the “special protection case” on the Sino-U.S. economy continues. On the other hand, the resulting trade frictions have also turned into signs of a "trade war." Zhang Handong, director of the Zhejiang International Trade Research Center, believes that cooperation and development are the mainstream of China and the United States, both of which are the second largest trading partners, rather than confrontation and losing each other. "The two sides should achieve mutual benefit and win-win through dialogue and negotiation. 'Thinking of struggle', hit 'trade war'."

Shen Jinrong hopes that when Obama visits China in the middle of this month, China can urge him to take back the "wrong decision" of the special insurance. “We must make clear to him: Special insurance is not really seeking opportunities for American factories and workers, but political factors. Ultimately it is their own people.” He said, “The Sino-U.S. trade has existed for a long time, interdependent, and With its flourishing development, its internal logic conforms to the interests of both China and the United States. It is not that political forces can be reversed; artificially distorting the free trade environment will be costly."

The biggest expectation of the tire worker Zhu Xiaojun is that “it is not necessary for something like special protection to happen again”. "The company has greater development and the income can be higher," he said. "If there is a chance, I also plan to buy a house in Hangzhou."

Sino-US trade war

On September 11, US President Barack Obama announced a three-year punitive tariff on all cars and light truck tires imported from China. The punitive tariff rate is 35% in the first year, 30% in the second year, and 25% in the third year.

On September 13, the Ministry of Commerce of the People's Republic of China issued an announcement to initiate anti-dumping and anti-subsidy joint investigations against certain imported automobile products and broiler chicken products originating in the United States in accordance with Chinese laws and WTO rules.

On September 28, the Ministry of Commerce of the People's Republic of China issued an announcement that since September 29, 2009, it will continue to impose anti-dumping measures on imports of polyvinyl chloride originating in the United States and other places, with an implementation period of five years.

On October 12, the Chinese Ministry of Commerce issued an announcement deciding that from October 13, 2009, anti-dumping duties of up to 37.5% shall be imposed on polyamide-6,6 chips originating in the United States and other places for a period of 5 years.

On October 20, the Ministry of Commerce of the People's Republic of China announced the preliminary determination of anti-dumping investigations on imported nylon 6-slices originating in the United States and other places. Since October 20, a guarantee has been levied on the products imported from the above mentioned countries and regions.

On October 29, China and the United States reached a consensus on the Sino-U.S. Joint Commission on Commerce and Trade in Hangzhou and promised to jointly oppose trade and investment protectionism and not introduce new trade protection measures.

On October 30th, the US International Trade Commission voted 6:0 to agree that the Ministry of Commerce will launch anti-dumping and countervailing duty investigations on seamless steel tubes imported from China. This may result in a 100% tariff on steel pipes imported from China worth 382 million U.S. dollars.

On November 3, the US Department of Commerce initially imposed punitive tariffs on Chinese wire trays exported to the United States.

On November 4, the United States requested the WTO to establish an expert group on the issue of so-called Chinese raw material exports.

On November 5th, the US Department of Commerce initially ruled that anti-dumping duties of up to 99.14% should be imposed on oil well pipes imported from China. The U.S. Department of Commerce claimed that Chinese manufacturers and exporters of oil well pipes sold in the United States were below normal prices, and therefore decided to impose 36.53% anti-dumping duties on 37 Chinese companies, and some Chinese companies would be subject to anti-dumping duties of up to 99.14%. .

On November 6th, the Ministry of Commerce of China announced that it decided to initiate anti-dumping and countervailing investigations on imports of cars and off-road vehicles originating in the United States from 2.0 liters and 2.0 liters.

The person in charge of the Import and Export Fair Trade Bureau of the Ministry of Commerce stated that the domestic automobile industry recently submitted an application to the Ministry of Commerce requesting anti-dumping and countervailing investigations of the above-mentioned imported automobile products originating in the United States.

On November 6th, the US International Trade Commission initially ruled that "double anti-dumping" tariffs, namely anti-dumping and countervailing duties, should be imposed on coated paper imported from China and Indonesia, potassium pyrophosphate, potassium dihydrogen phosphate, and dipotassium hydrogen phosphate imported from China. tariff.

According to a statement issued by the U.S. International Trade Commission, the committee made preliminary rulings on the “double reverse” issue in some cases involving Chinese products, such as coated paper, potassium pyrophosphate, sodium tripolyphosphate, potassium dihydrogen phosphate, and phosphoric acid. Dipotassium hydrogen and so on. Among them, the International Trade Commission initially ruled that "double counter" tariffs should be imposed on coated paper, potassium pyrophosphate, potassium dihydrogen phosphate, and dipotassium hydrogen phosphate. In addition, the International Trade Commission initially ruled that imports of products such as sodium tripolyphosphate from China did not constitute countervailing subsidies and anti-dumping, that is, such imported products did not affect the U.S. market.

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