I am coming to this story very late, so apologies for that. I have a huge number of stories on this, so it will take me several days to get through it all.

I considered researching everything and coming up with a consolidated, cogent and efficient post on the topic. I then realized how much time and effort that would entail and decided against it. Mea culpa.

Given time constraints, I think I’ll instead run a series of posts on some of the better/more interesting stories I have run across on the issue, particularly how this trade dispute relates to the overall trade picture. As you are no doubt aware, the US-China bilateral relationship is getting a bit weird at the moment, with trade issues heating up quite a lot during the past couple of weeks. This tire case is just one piece of the puzzle.

Right, to start things off, a little background. This will be just a bit painful, but important. The debate over tires is not your typical anti-dumping or discriminatory trade action that you hear about on a regular basis. The specific mechanism that will be used by the US stems from the agreement China signed when it acceded to the WTO — referred to as the Accession Protocol.

In that document, specifically on page 9, Section 16, there is provision entitled “Transitional Product-Specific Safeguard Mechanism.” Here are the important bits:

In cases where products of Chinese origin are being imported into the territory of any WTO Member in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or directly competitive products, [then the Member State may take action.]

[ . . .]

If consultations do not lead to an agreement between China and the WTO Member concerned within 60 days of the receipt of a request for consultations, the WTO Member affected shall be free, in respect of such products, to withdraw concessions or otherwise to limit imports[.]

There are some conditions attached to this and some procedural issues, but essentially this is it. A WTO member may take action when Chinese imports are causing, or are threatening to cause, a market disruption. By the way, the provision expires after 12 years, which is a hell of a long “adjustment” period. Calling the section “Last-gasp Protectionism” would have been more accurate, but less palatable politically, I suppose.

This provision has a presence in US law — Section 421 of the Trade Act of 1974 (China-Specific Safeguards). Nothing too exciting in the text; it lays out the details of the procedure referenced in the Accession Protocol with respect to the US government and gives the president discretion as to the application and extent of remedies.

The language is actually slightly entertaining as, depending on what part you read, it sounds as though presidential action might be mandatory. However, in other sections, huge windows of discretion are opened for the president, rendering those tough-sounding passages completely toothless. I guess that’s how Congress works.

Keep in mind that this is therefore not an action based on any violation of US or WTO law. Here’s how one free trade blogger put it (I like the language):

Please note the conspicuous absence of a word about “unfair trade” or “violations of US law.” That’s because, unlike antidumping or countervailing duty investigations, China-specific safeguards do not address or remedy unfair trading practices. So technically, China has done nothing “wrong” here other than to sell lots of tires – that Americans obviously want and benefit from – in the United States. Oh, the humanity!

So the decision made by the Obama Administration this week to apply duties to Chinese tire imports to the US under this provision was entirely optional, not forced upon the administration by US law and some sort of finding of unfair trade practices or other trade violation.

In my mind, “optional” almost always means “political.” That will be the theme I will pick up in other posts, but let me close with this. Unlike an anti-dumping case, where a violation has been discovered, this tire case does not have a “bad guy.” The Chinese exporters here were merely being successful, and will be punished for it because of the provision of the Accession Protocol.

I have some strong opinions on the merits of Obama’s decision here (you can probably guess), but enough on this for now.