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Editor's Notebook

Fuzzy ‘Fix’: Ill-Placed Countervailing Duties Counter to Free Market Economy

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Been thinking about this whole Chinese tire-International Trade Commission/Commerce Department matter. And it is a difficult one, to be sure.

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I am not necessarily a fan, for instance, of good manufacturing jobs leaving these shores. But I do understand – and agree with – the concept of a Free Market Economy. You know, the one where winning and losing is determined by market forces and not government intervention.

That paradox leaves me with the obvious mixed feelings.

As I see it, though, the Titan/USW-led campaign against Chinese tires – specifically OTR tires smaller than 39-inch wheel size – and subsequent ITC/Commerce Department rulings were wrong-headed and misdirected.

Among the three types of China-produced tires in our market are those produced and exported by well-recognized, major brand companies. No one’s concerned about those.

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Then there are the pure Chinese brands, tires some feel have questionable technology and quality, products that currently do not have a track record of delivering “value.” Many of these are packed into containers for whoever cares to buy and/or resell them, often at attention-getting prices.

Finally, there are tires produced in Chinese factories – and even those in other nations – under the strict control of established companies like CMA, API, GPX, private branders and others. Market competitive in price and performance, these products are backed by heavy engineering and design, significant R&D spending, on-site management and control, and market-accepted warranty programs.

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This particular issue is the step-child of the decade-long global OTR tire shortage, one driven by demand in China (there’s irony), rising commodity prices, and our wars in the Middle East. When the majors couldn’t keep up, China-made products filled the void, and at pricing certain folks didn’t like.

“Unfair,” they cried, “They get government subsidies so they can sell here at low prices. We have to protect jobs and American industry, and we cannot do that without a level playing field.”

So how do we level that “playing field?” We get our own form of government support: countervailing duties (lovingly called the “Morry Taylor Tax”) on ALL Chinese makers.

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Unfortunately, that broad-brush approach unfairly painted fair-play, market competitive companies like CMA, API, GPX and others.

Understandably, these companies are a little ticked, and rightfully question just who got hurt…and by whom. Jeff Kreitzman, CEO of API, told us, “I feel bad that Titan cannot identify what its advantages are and how it can sell in the marketplace…We don’t see where Titan has been injured. Its stock is trading at an all-time high. The company is profitable.”

In its own statement, CMA said the main focus of the investigation was “low-cost, commodity bias items that have been difficult to competitively produce in the U.S.” CMA, though, said its radial OTR tires were unfairly lumped in with the bias product.

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“The main plaintiff in the investigation (Titan) does not even manufacture these types of tires and most of another of the plaintiff’s production of this product comes from outside the U.S.,” CMA said.

The shotgun approach used to apply the added tax – duties that reach, in some cases, 210% – must be rethought. The ITC and Commerce should realize that not all China-based tiremakers and their U.S. marketing partners are alike.

The concept of a “free-market economy” means market forces – not unequally applied “equalizers” – should weed out the weak and unworthy. If we claim to have a fair, free market in a global marketplace, then fair means every player – not just the ones we like – should be allowed to succeed or fail on their merits, their products, their service.

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Where will it end? Today it’s small OTR tires. How long until it’s medium truck tires or consumer units? Or the focus shifts from China to India, Malaysia, Turkey…pick a place?

We take pride in our freedoms and democracy, so much that we want to share them with the world. That includes our free-market economy, a fair and balanced system that rewards innovation and determination and shakes out posers and pretenders, creating a highly competitive marketplace.

Like it or not, it’s an all-in deal, not something you can roll out or pull back when the mood strikes. It applies equally to everyone who takes the risk to participate, regardless of their home address.

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We have spent years helping tire dealers succeed against a succession of price-based competition, from company-owned stores to mass merchants to price clubs to the Internet. Maybe some suppliers need to do a little reading.

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