While most of the rainbow nation was preparing to welcome people from far and wide to the first World Cup on African turf, the country’s legal eagles were deliberating over whether or not to kick certain Chinese tires out of the country with an anti-dumping investigation.
On June 5, the South African press reported that the High Court of Pretoria’s Judge Willie Hartzenberg set aside an earlier ruling made in 2007 by the Trade and Industry Ministry, to terminate anti-dumping probes against Chinese tire exporters. He further ordered an anti-dumping investigation be completed within four months.
The judgment was duly lauded as bringing "fair competition" to the tire manufacturing industry by those who brought the case, namely Bridgestone South Africa, Continental Tyre South Africa, Dunlop Tyres International and Goodyear Tyre & Rubber Holdings through their representative body South African Tyre Manufacturers Conference.
Whether or not the Chinese tire imports in question can accurately be described as dumping and it would be prudent to let the courts decide that the ruling is another sign that products manufactured in the People’s Republic are not the quick and easy sell they once were. As far as tires are concerned, the combination of increasing natural rubber, oil and steel input prices, combined with an unstable shipping costs and the increasingly inhospitable international trade climate mean the latest decision in South Africa may force some Chinese factories to rethink either the delivery strategy or destinations of their tires.
The South African decision represents another effort to halt the flow of Chinese tire exports. Following President Obama’s decision to impose import tariffs on Chinese produced passenger car tires at the end of 2009, the Chinese government opted to reduce subsidies available to Chinese tire exporters.
There was then speculation that Europe would become the destination of choice, with countries such as the U.K. (which is well known for its penchant for budget tires) on top of the list. However, despite the fact that some sources are already reporting there have been signs of increased activity in this part of the U.K. market, it remains to be seen whether there has been any lasting difference. Either way, it seems clear that the European legislation mandating tire labeling that is due to be introduced in 2012 will lop off the bottom end of this market.
Around the same time the U.S. tariffs were introduced, Tyres & Accessories visited China and spoke to some of the factories and exporters that are now directly affected by this piece of legislation.
Anyone scratching their head about where, if not Europe, the Chinese tires were now going may be surprised to learn that Africa swiftly became the destination of choice for Chinese factories looking to move cheap economy tires they couldn’t shift elsewhere.
Which brings us back to the South African court ruling. Should the anti-dumping investigation Judge Hartzenberg mandated result in the imposition of further trade sanctions, this could force the exporters in question to have to increase prices to meet the various markets demands, raise quality to meet ever-increasing legislative requirements and/or rethink their global distribution strategies. All of these will increase the production costs of Chinese tiremakers and therefore there is the possibility they (along with the other market conditions mentioned above) act as a catalyst for long foreseen market consolidation amongst Chinese tire manufacturers.
Of course any new legislation is only as strong as the enforcement regime that accompanies it. And you could be forgiven that the fractured nature of relations between the different African states may mean there are loopholes a plenty frough the back door and avoid any future tariff. But this is another point that makes Judge Hartzenberg’s ruling so interesting.
In its final report, published in 2007, the government said that six ofthe alleged tire dumpers did not dump their products in South Africa,but that tires were dumped by other exporters in the Southern AfricanCustoms Union region. The investigation found that other factors,and not dumping, resulted in the SACU manufacturers’ suffering. JudgeHartzenberg was not duped by this kind of tire-laundering and said thegovernment “did not pay adequate attention to the investigation.”
In and of itself, the South African announcement is not likely to havean earth shattering great effect on the global market. But coming, asit does, as the latest in a line of similar hindrances for Chinesetiremakers, its begs the question: which future announcement will bethe straw that breaks the camel’s back and precipitates a round ofChinese manufacturing consolidation? (Tyres & Accessories)