Monday, December 13, 2010

News Headlines: "US imposes tariffs on Chinese tires"..."Traffic fatalities increase at an alarming rate"---How are these two stories related?


From WSJ: WTO Backs US in Tire Dispute with China
 The World Trade Organization Monday sided with the U.S. over tariffs the Obama administration imposed last year on Chinese tires, in a high-profile case likely to stoke tensions in coming U.S.-China trade talks.

The WTO dispute-settlement panel ruled in favor of President Barack Obama's decision from September 2009 to levy tariffs of as much as 35% on Chinese tires under a rarely used safeguard provision to protect against import surges, provoking one of the biggest trade spats between the two countries in recent years. In addition to taking the case to the WTO, China retaliated by announcing a series of duties on U.S. chicken, nylon and other exports.

U.S. Trade Representative Ron Kirk called the decision a "major victory" that demonstrates the solid legal underpinnings of U.S. trade remedy laws.

"This outcome demonstrates that the Obama administration is strongly committed to using and defending our trade remedy laws to address harm to our workers and industries," Mr. Kirk said in his statement.""
No "harm to workers and industries" in the protected industries, but what about the harm to consumers who have to pay more for not only Chinese tires, but American tires as well...Oh, wait, you did not think American tire producers would keep their prices the same now that they got the tariff imposed...did you?

The Chinese tires are of the lower end of the market type tires that, in general, lower income people purchase.  So the effect WILL BE (I don't mince words here) delayed purchase/replacement of tires by this group, which in turn means more unsafe tires on the road, which in turn means more traffic accidents, which in turn means more injuries/fatalities "at the margin". 


The lesson here is one of "rent-seeking"---the use of government to confer benefits on the few (the tire industry and their workers/Unions) at the expense of the many (everyone else who buys tires).  The benefits are concentrated while the costs are diffuse. 
Mr Kirk's statement could be worded like this too and not lose its meaning:  
"This outcome demonstrates that the Obama administration is strongly committed to using and defending our trade remedy laws to address impose harm to on our workers consumers and industries their families ," Mr. Kirk said in his statement.""
Is this too harsh? Tell me where I am going wrong...
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