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11/01/2017
US: TOUGHER MEASURES AGAINST CHINESE GOODS. AND EUROPE?

Antidumping measures

 

While the United States (among other countries) are implementing increasingly stringent anti-dumping measures, in Europe the dilemma is about reconciling the protection of local products with free trade. The retreading industry, with its long history in both Europe and Italy, is certainly among the sectors that are calling for action, in order to protect its technical excellence and jobs

Nicoletta Ferrini

The barriers placed by the US government to curb the access of Chinese tires in the Stars and Stripes market are becoming increasingly “higher”.  According to a recent survey conducted by the United States Department of Commerce (DOC), a number of Chinese exporters of truck and bus tires are benefiting from government subsidies and selling their products in the United States at a much lower price than their real market value. Faced with this situation, the United States are running for cover: the DOC has in fact announced, in a preliminary form, the duties to be applied in the near future, from 20.87% to 22.57%, depending on the manufacturer, on imported truck and bus tires produced in China. The final decision on the implementation of such measures, though, is expected only by next January. However, it is also quite clear that any measures introduced will also have a retroactive effect. The US Custom and Border Protection Agency, in fact,  will be eventually entrusted to impose duties up to 90 days before the final publication of the preliminary draft in the Federal Register. Considering the whole registration process, a likely date would be June 7. These new import duties could be added to the compensatory tariffs already proposed for this product range last June, which were between 17.06% and 23.38%. In this way, total import duties could be as high as 40% for some exporters.

 

USA (and not only) against Chinese “dumping”

The focus isn’t just on tires, though. The recent crackdown by the US government, in fact, was a targeted effort aimed at protecting local production and curbing the expansionistic policy of the “Chinese tiger”. Since the domestic market is not providing an adequate demand for its growing production capacity, the Chinese tire industry has, in fact, set its sight on exporting massive amounts of tires at extremely low prices, often even lower than the prices charged in the Chinese market. In order to stem the tide, a number of Countries have, over the years, decided to set up trade barriers, making them progressively more difficult to overcome along with a number of other anti-dumping measures. The game though isn’t being played by the US alone, in fact other countries such as Brazil, India and Indonesia have followed suit.

 

What about Europe?                                            

True to its traditional “free market for free trade” philosophy, the old continent has, so far, chosen  not to follow the same footsteps. On the other hand, there is no shortage of rules and laws governing access to the European market. In particular, the tire sector can boast a significant regulatory framework defining the necessary requirements to be met by products distributed in the European market. Ultimately, the desire is to end up with a free but fair trade environment, ensuring fair competition in an open and balanced market. Yet, the road to such fairness has become the ground of an open confrontation within the EU Commission.

For several months now, great discussions have been made in Brussels on whether or not to grant China the Market Economy Status (MES), a choice that is experiencing strong opposition from the industrial establishment. In an attempt to overcome the deadlock, the 28-country European Union announced a new method to calculate excise duties by the end of the year.
The urgency of the matter is quite evident in a question: since other countries are raising difficult trade barriers to penetrate, will the European market become the favorite if not the only target for the huge Chinese production?

                                                                       

Tires: a sector in dire straits                                              

According to many in different industrial sectors, and the tire industry is no exception, such a scenario is placing in great danger not only the European production with its millions of workers, but also its levels of innovation, research and development that have, over many years, helped creating real products of excellence for the whole sector. This is especially true when it comes to tires. In Europe and Italy alike, this long-standing supply chain has generated a unique entrepreneurial heritage and know-how.

For several years now, ETRMA (European Tyre and Rubber Manufacturers' Association), has been sounding the alarm: European companies engaged in processing rubber are struggling to keep up with foreign products, especially from Far East Asia. In 2015, the pressure placed by imports on locally produced tires had significant effects in different segments of the industry: from "passenger" to "truck", "farming” and retreads.

 

Whether new or retreaded, “Made in Italy” tires are in jeopardy

The retreading sector seems to have paid, in recent years, the highest price, recording a real vertical drop in sales. Retreads, in fact, are increasingly suffering the aggressive pricing policy imposed by Asian manufacturers, even in segments, such as the transport business, where retreads were once considered the most convenient solution. And it doesn’t end there. Looking at the considerable sale reduction of premium tires, which traditionally supplied the “raw material”, retreadable casings, the future looks anything but serene. The future of the retreading industry is, in fact,  interwoven with the market of new products and the consequences of a reduction in new retreadable tires will cascade throughout the supply chain. The setbacks that manufacturers and retreaders are experiencing will also, in turn,  produce a threatening reduction in terms of investments on  research and development. This phenomenon could seriously jeopardize one of the key elements that has always characterized the manufacturing sector in Europe as well as Italy: innovation.

The absence of greater market control could trigger a race to the bottom in the sale price of new tires. This could lead many to reconsider investments in terms of new designs as well as product development, and prompt many to gradually abandon the retreading sector. This would, in turn, encourage a “disposable” consumer behavior, which, besides being contrary to a logic of circular economy, would also lead to a real waste of technological content. Such technological depletion would ultimately hurt no one else but the end consumer.
Finally, what should also be underscored is that in Europe, and consequently in Italy as well, the tire supply chain employs, whether directly or through spin-offs, thousands of workers with high levels of professionalism and hundreds of companies that represent a real wealth of knowledge and entrepreneurship.

 

Excise duties or no excise duties? That is the problem   

The idea that the introduction of excise duties also on tires imported in Europe could be a solution is shared by a large number of stakeholders, especially in light of the recent DOC decisions in the US. This would not be something completely new; in fact, as far as rims are concerned, in 2010 the EU Commission decided to impose tariffs of up to 20.6% on imported alloy wheels produced in China. The results, though, were not as significant as it had been hoped, and this, in part, supports those who argue that rules and higher trade barriers in Europe are unnecessary, what we really need are better market control and the willingness to protect the quality of European products as well as industrial diversification. Whatever the best option may be, the bell has rung and Europe is now called upon to make its move.

 

Dumping: definition

The export by a country or company of a product at a price that is lower in the foreign market than the price charged in the domestic market, or even under-priced and usually subsidized by the local government, with the goal of gaining large portions of foreign markets

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