Sino-U.S. tire special security case submitted to Obama Austria may be rejected in dilemma

Tyre protection case submitted to Obama into a 15-day long test

Domestic parties expect Obama to reject the sanctions proposal is highly likely, at least a compromise will be introduced

China's special case for tires sold to the United States ushered in a critical time node. In the early hours of September 3, the Office of the U.S. Trade Representative submitted to the U.S. President Barack Obama the final proposal report on the case of China’s special tire insurance program for American tires.

According to arrangements, Obama will make a formal ruling before September 17.

On April 20 this year, the United States Steel Workers’ Federation filed an application to the US International Trade Commission on the ground that China’s tire exports to the United States have disrupted the US market, and initiated special safeguard investigations on Chinese tires for passenger cars. On June 29, the U.S. Trade Commission proposed to add 55%, 45%, and 35% to the China-used passenger car and light truck tires for three consecutive years based on the current import tariff (3.4%-4.0%). Special ad valorem tariffs.

This case is the first special security investigation initiated by the Obama administration of China. The Wall Street Journal has described Obama's "dilemma" - "If he stands on the side of the case applicant steel worker, he will face protectionist accusations; on the side of China, he may disappoint his main voters."

In the 15 days "long test", Obama made any decision possible.

Xu Wenying, the deputy secretary-general of the China Rubber Industry Association and the two hearings of the Chinese special case for tire protection in the United States, told this reporter: “The possibility of agreeing or vetoing resolutions exists, and Obama may also propose his own set. Program."

According to historical experience, all parties expect Obama to veto sanctions more likely.

Xu Wenying said that during the Bush administration, the United States had launched six special safeguard investigations against China and none of them had taken special safeguard measures. This time, Obama is also very likely to veto sanctions.

According to informed sources close to the negotiators, according to the latest news from the United States, Obama’s dismissal of the sanctions proposal is highly probable. At least one compromise will be introduced.

Domestic related production companies and industry researchers are also expected to be optimistic. The person in charge of the Delicate Group said, “From the time we went to the United States to participate in the hearing, the views of the Chinese have won the support of the majority of political circles in the United States.”

At present, China's annual export volume of tires accounts for more than 40% of total production. If we reduce the output of half of American tires, it means that China will have 12% of the remaining tire capacity. In addition, according to the WTO rules, if Obama approves the special security sanctions against China, the relevant countries can directly invoke the US sanctions program.

Tyre protection case affects the nerves of listed companies

The heart of the rubber industry was mentioned in the eyes of the blind. The final result of Obama's first Sino-U.S. trade friction case will have a wide range of impact on the entire rubber industry and related listed companies.

According to the report of the relevant listed company in 2008, the largest share of export revenue in the main business income is S-Gatton. 70% of its products are exported, and the proportion of exports to the United States is relatively large, most of which are low-end products. The protection of the special security case will be very unfavorable for the company. Followed by Aeolus shares, Qingdao Double Star, Sui Tire, the proportion in the range of 18% -35%.

A manager of S.G.T.H.S. told reporters: “Our major shareholder, Jiatong Tire Investment Co., Ltd. had previously participated in the negotiations, but at present we have not received the final sanction.”

“The impact of the special security case on the exquisite group and even the Chinese tire industry is beyond doubt.” The person in charge of the exquisite group said, “Now the Exquisite Group's product export accounted for nearly 40% of total sales, and the US market accounted for about 15% of its export share. The results of the project protection will have an important impact on the company's future development and strategic direction."

According to the statistics of the main 44 members of the tire branch, the overall output value, output, export, and sales revenue of the company in the first half of the year all declined compared with the same period of last year. However, due to the country’s expansion of domestic demand to encourage auto consumption and raw material prices to remain low for several months, several leading tire listed companies’ general profits in the first half of the year have increased by 100% to 200%.

“What is the result of the special security case is the biggest uncertainty factor for the tire industry in the second half of the year?” said Yan Jin, an analyst at Beijing Futures Futures, “If the outcome of the special security case is unfavorable to China, the results achieved in the first half of the year will likely Abortion."

In addition, many analysts also said that once the special security case is unfavorable to China, the production capacity of export enterprises can only return to the domestic market in the short term, which will have a great impact on many domestic tire manufacturers.

The case of China's special insurance for tires sold to the United States not only affects the nerves of tire companies, but also the upstream rubber production companies are closely watching the final results of the special security case.

“The impact of the special security case on us is no less than that of the tire manufacturer.” Lin Tao, deputy general manager of Hainan Natural Rubber Industry Group Co., Ltd., while on the train, has been paying attention to the progress of the special security case. “In addition to the State Reserve’s 55,000 Tons of tons of natural rubber that we produce are provided to tire companies. Once the US sanctions against tire companies, we will be very passive.”

Since 2001, China has surpassed the United States as the world's largest natural rubber producer. Due to climatic conditions, industrial scale and other reasons, 80% of domestic rubber consumption depends on imports. Domestic natural rubber companies do not have the advantage of competing with foreign companies in terms of price and output.

“This year, natural rubber prices have picked up, and many traders have signed contracts with us to lock in risks.” Lin Tao said, “Once the special security case caused natural rubber prices to fall, we could only get liquidated damages and hoard a lot of days. Glue."

In addition, some traders and exhibitors who have been interviewed by this newspaper have expressed concerns about the special security case. Earlier, Fan Rende, president of the China Rubber Industry Association, once said that once the special security case passed, more than 100,000 people in the relevant industries would be affected.

Tire protection if there is no winner

In the early hours of September 3, Beijing time, the U.S. Trade Representative Office (USTR) submitted the final proposal report on the Chinese special tire insurance program to U.S. President Barack Obama. According to the original arrangement, Obama will make final instructions between September 3 and September 17.

Deng Yaxi, vice president of China Rubber Industry Association, said in an interview with this newspaper on the 3rd that “The specific plan is still a top secret document and it is expected to know the contents of the document within this week.”

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It is more likely that the special protection case will be vetoed

According to informed sources, Obama is more likely to veto the special security case. Earlier, there were also reports that, as the voice of internal opposition in the United States grew louder and louder, Obama was very likely to dismiss the U.S. Steel Workers Federation’s request for a tire special security case.

Xu Wenying, deputy secretary-general of the China Rubber Industry Association and an important negotiator for the two special hearings on the China and the United States tire protection case, disclosed to this reporter that Vice Minister of Commerce Zhong Shan and more than a dozen officials from the Ministry of Commerce and the President of the China Rubber Industry Association Fan Rende, secretary general of the Rubber Industry Association of China's Rubber Industry Association, Cai Weimin, went to the United States last weekend to make final mediation with USTR and other US related agencies. In addition, several Chinese lobby groups have been actively lobbying and trying to influence Obama’s decision at the last moment.

The person in charge of the Delicate Group stated that they had organized delegations with several other tire companies in the United States to attend the hearing in the United States. From the situation at that time, the views of the Chinese side were supported by the majority of American political circles.

According to the circumstances of the previous two hearings, people in the industry generally believe that Obama’s veto of sanctions is highly likely. Beijing-based medium-term futures analyst Yan Jin said, “Chinese tyres are mainly mid-to-lower tires, and they are used by American tire companies. With minimal impact, only the Steel Workers Association is required to sanction China in the United States."

Some brokerage industry analysts told reporters that the possibility of implementation of the special security case is not high, but the results have not yet come out, if the worst case appears, tire companies may be forced to carry out product restructuring or industrial transfer.

Once passed, it will harm multiple interests

The US Tire Free Trade Association estimates that once the special security case is implemented, nearly 25,000 people will be unemployed in the field of tire distribution and retail sales, which will seriously damage the interests of the US tire distributors and retailers.

The U.S. Retail Leaders Association, which represents the interests of the largest retailers, product manufacturers, and service providers in the United States, said that restricting tire imports during difficult economic times will lead consumers to spend an additional $600 million to $700 million each year. In order to save expenditure, it will give up or postpone the replacement of automobile tires, which will seriously threaten the personal safety of consumers.

"U.S. special insurance for Chinese tires not only hurts China, but also does no good for the U.S. economy." Zhang Jianping, director of the International Economic Cooperation Office of the National Development and Reform Commission's Institute of International Economics, believes that U.S. tire production costs are relatively high and are not competitive. If such temporary measures are taken to solve the employment pressure in the domestic tire industry and continue to invest in this uncompetitive industry, it will still require a lot of people to cooperate, which is not conducive to the allocation of resources and is not conducive to the health of its economic structure.

"From March to May of this year, China's tire exports to the United States dropped by 26%, 29% and 16% respectively year-on-year, and it is very likely that the first year of negative growth since the reform and opening up was achieved throughout the year." Deng Yaxi said, "If the special security case is passed, Chinese tires will have to exit the US market."

"More than 40% of tires produced by Chinese tire companies are exported, while those of U.S. tires account for more than 20% of total production." Deng Yaxi said, "If the special security case passes, Chinese tires will exit the US market. One hundred thousand industrial workers will be affected."

Some analysts worry that once Obama opens the "Pandora's box," Sino-US trade will add more variables in the future.

Since the financial crisis, new trade protectionism has been booming. Trade protection has become a trend due to the reduction in the number of orders and the decline in employment. Zhang Jianping said that the United States' investment in tires, which are not competitive domestic labor-intensive industries, is only a gesture that politically meets the people.

Prior to this, the Indian Ministry of Finance’s Bureau of Safeguards initiated an investigation into the special insurance for passenger car tires in China on May 18. The Brazilian Foreign Trade Commission directly announced on June 18 that it imposed anti-dumping duties on imported passenger and truck tires from China. , valid for up to 5 years.

In addition, according to the relevant rules of the WTO, if Obama approves the special security sanctions against China, the relevant countries can directly invoke the US sanctions program without conducting special safeguard investigations.

Earlier, the Bush administration of the United States had initiated six special safeguard investigations against China and none of them had taken special safeguard measures.

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