Tires and Chicken Feet

Tires and chicken feet.  

Two items I would never even have thought of together. And yet, a trade war between the U.S. and China has created a closer relationship between the two than I think anyone could have imagined.

In 2009, President Obama imposed 35% tariffs on tires imported from China. He did this at the request of the United Steelworkers union, which also represents American tire workers. Shortly thereafter, China imposed tariffs ranging from 43.1% to 105.4% on chicken feet imported from the U.S. The main result, as far as I can tell, was increased prices for both Chinese and American consumers.

The labor union may have wanted the tariffs, but the Tire Industry Association did not. The tariffs did lessen imports from China, but rather than increasing American production, tire imports came in from new countries instead. This article, Obama's Half-Truth On China Tire Tariffs, from Forbes, tells of increased imports from Canada, South Korea and Japan, to name a few. Not only did the tariff not protect American jobs, it actually cost them. Before the tariff, the tire industry employed about 55,000 people. By 2010, that number had dropped to 51,600. And that's only half the insanity.

There is not a huge market for chicken feet in the U.S. Most Americans are uninterested in them as a food, unlike many Chinese who see them as a delicacy. So U.S. chicken farmers sell them to China, among other countries. But China claimed that the chicken feet were being dumped into their markets, and responded with anti-dumping tariffs. Never mind that chicken feet sell for more on the Chinese market than they do domestically. 

I really don't understand trade wars. It seems to me that no matter what angle you look at this crazy situation from, no one was actually helped by the protectionist actions on either side. And, as usual, it was the individual consumer who took the brunt of things, with higher prices all around.

If a new tire manufacturer opened in the U.S., and was able to sell tires at a lower cost than their competitors, well, that would just be capitalism at work. But if the tires are from another country, they're a threat to our very way of life! I thought that capitalism was supposed to be our way of life. I may be something of an idealist (or even a lot of an idealist), but I really dislike hypocrisy. I don't really know whether the members of our government believe we live in a truly capitalist society, but I would guess that many Americans would say we do, and almost all economists would say that we don't. I know that there is likely no such thing as a pure system of any kind, but I think that in general, we choose to ignore that reality.

It seems to me that when politicians make decisions about trade, like the U.S.'s about tire or China's about chicken feet, they either don't have or are refusing to look at all of the pieces. I'm simply an M.B.A. candidate, taking my very first class in Global Economics, and this kind of behavior seems so clearly harmful to me. I'm sure that government officials have people far better educated than I who can tell them the likely long-term effects of these decisions. Do they just choose not to listen? Is the immediate support of groups like the United Steelworkers union more important than any long term damage to the national economy? If that last one is true, than we really are in trouble as a society. I can't even begin to imagine how to start fixing things.

Unintentional Barriers to Trade

I am definitely not any sort of expert on politics. I don't know a whole lot about the details that make our government run, and I know even less about any other country's government. That being said, I think that politics are the most hazardous unintentional barrier to trade in this country.

Politics and trade are strongly interconnected. It's the government, after all, that makes the policies regarding trade, and creates trade agreements with other countries. Politics are sometimes used deliberately to influence trade, and trade is frequently used to influence politics. With all of that going on, it's hard to separate the two, no matter what country you look at. I think the United States, however, has some unusual circumstances that create a whole new set of problems.

The political system is the U.S. is, to put it simply, a mess. The bipartisan arrangement means that the country is fighting against itself every 4 or 8 years. What one group wants to create, the other wants to destroy, and vice versa. In the time of the Great Depression, the Republicans supported protectionism, while the Democrats prefer free trade. Today the reverse is true. Democrats support protectionism, because the labor unions believe it protects jobs, and the Democrats support the labor unions. Furthermore, for the past 20 years, each election has flip-flopped which party held the Presidency. The last time the same party held the office for two different presidents was when the elder George Bush followed Ronald Reagan. What we end up with is trade policy that advocates one idea being passed by one President, only to have it be overturned or limited by new policies when the next group takes power.


The other problem that leads politics to threaten trade is that human beings have the attention spans of mayflies. If a new law or policy doesn't fix something immediately, it must not be any good. This perspective holds true for individuals, and is only amplified when the cause is taken up by companies, large groups and their lobbyists. Take NAFTA, for example. NAFTA was ratified in 1993, just barely 20 years ago, and it's already being attacked from all sides. Some say that it was a horrible idea from the get-go, and has only made things worse for the U.S. Others say it might be a good start, but it simply hasn't done enough. But while 20 years may seem like a long time, economically it's barely an instant. The European Union began its development with the Treaty of Rome, in 1957, almost 40 years before NAFTA came along, and it continues to be adapted and adjusted it to this day.


My point is that people, be they individuals or political forces, don't want to give these sorts of things enough time. I can understand why time is a difficult force for a President. You have at most eight years in which to make your mark on the country, and likely you'll only be judged on what happens when you're actually in office, never mind if the bill you passed causes huge economic growth 15 years later. But that's just part of what's wrong with out political system.


When trade policy is constantly leaning first one way and then another, it never really has a chance to make a proper impact. I think the political squabbling in this country is as much to blame for our current economic situation as anything else, though I certainly don't have anything concrete on which to base that. If I was able to create a policy to lessen the damage the politics do to trade in the United States, it would be something that prevented any trade policy from being messed with for a certain amount of time (barring emergencies like war and such). If the government was forced to give a policy a chance before throwing barriers down in front of it, it might actually improve things. Even if the policy turned out to have problems, time would give us a chance to learn from it, and maybe the next policy would do better. Right now, the political parties support different types of trade for political reasons. But if trade law actually had a chance to do what it's meant to, and people could really look at and analyze the results, the government might start passing laws for no better reason than to help improve the nation's welfare. Imagine that.