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On Friday, September 11, 2009, the Obama administration made an announcement that not only was a first for trade remedy law but also has become a fairly visible news media story:  for the first time, the United States will impose ?market disruption? safeguards on imports from China.  The goods in question are passenger vehicle and light truck pneumatic tires.  The Obama administration's proclamation can be viewed here; New York Times and Wall Street Journal coverage can be linked to here and here. The result is that there will be increased duties on U.S. imports of these Chinese tires for three years.  I want to discuss some of the broader policy aspects and implications of this safeguard action, but in order to do so I will first give a brief synopsis of the law in question.

U.S. safeguards laws are intended to temporarily protect adversely affected U.S. industries from the dislocating effects of rapid increases in imports.  U.S. "global safeguards" are imposed against imports from all countries and are generally consistent with U.S. obligations under Article XIX of the General Agreement on Tariffs and Trade (GATT) and the WTO Safeguards Agreement.  U.S. country-specific or regional safeguard provisions also in place.  Most are pursuant to regional trade agreements, but the safeguard action in question here is being taken pursuant to section 421 of the Trade Act of 1974 (19 U.S.C. s. 2451), which permits safeguard actions against imports from China that are a "significant cause" of "material injury" or threat thereof to a U.S. industry.  Section 421 was enacted in 2000 in anticipation of China's accession to the WTO, and its protections were agreed to by China as part of its WTO accession package.  U.S. safeguard actions are imposed (or not imposed) at the president's discretion upon an affirmative determination of injury by the U.S. International Trade Commission, which means that safeguards are essentially a pure trade policy instrument, as opposed to antidumping and countervailing duty actions, which are intended to be corrective in nature.

All of this means that while there is general uproar in China about this particular safeguard action--China is in fact threatening to impose new import tariffs on U.S. chicken meat and automotive products in response--this safeguard action against Chinese tires is lawful both from a U.S. law and WTO perspective.  What is more interesting to consider, therefore, is what this safeguard action suggests about current and future U.S. trade policy.

First, this is a fairly rare example of the type of ?free but fair trade? action mentioned by President Obama during the 2008 campaign. The Obama administration?s trade actions have not matched the Obama campaign?s trade rhetoric--there has no move to renegotiate NAFTA or its side agreements, for example. I also doubt there will be many, if any, additional China-specific safeguards imposed in the near future: a healthy trade relationship between the U.S. and China is simply too important to both countries.

Second, and for the same reason, I doubt the action will lead to a large-scale (or even mid-scale) trade war. There may be retaliatory tariffs imposed by China, but matters will not escalate too far beyond that.

Third, and perhaps most interestingly, I believe this safeguard action can and should be thought of as an example of the Obama administration?s greater interest (as compared to the prior administration's) in regulating markets to achieve particular outcomes thought by the administration to be more equitable than the market might otherwise achieve. Much attention, for example, has been paid to the Obama administration?s efforts to manage the financial crisis and reform health care--efforts, in other words, to regulate those important markets and achieve different outcomes. The imposition of U.S. safeguards on tire imports from China also regulates a U.S. market (and a large one at that) through the use of traditional (and overtly protectionist) tariffs. The desired outcome is to soften the blow of imports on the affected industry. Certainly it is true that this decision is also a nod to organized labor?and I would be remiss if I did not acknowledge that the tire safeguard investigation was in fact requested by the United Steelworkers. Still, the decision is consistent with a general increase in greater market regulation, and specifically in regulation that achieves outcomes that are perceived of as "fair" from some normative perspective other than efficiency.

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