By Larry Marsh, Kansas City Star Midwest Voices columnist 2009
Since this was written, President Obama has signed an order for a 35 percent tariff on Chinese tires. Obama's gesture is pointless since the tariff is temporary and only applies to China. Low income American consumers should not worry. Wal-Mart will find cheap tires from another low-wage country to quickly fill the gap.
President Obama must make a key decision about which way to lead America in the 21st century. Should he hit consumers with a 55 percent increase in the price of imported Chinese tires at Wal-Mart and other discount tire outlets to protect workers at American tire manufacturing plants and risk retaliatory curbs on American exports? Or, should he resist union demands to fend off the cheap Chinese tires? Cooper Tire in Albany, GA has already laid off over 2,000 workers.
Under a law passed by Congress in 2000 and agreed to by China when it joined the World Trade Organization, the United States can impose a temporary tariff when a surge in imports from China threaten to hurt a U.S. industry. In July the U.S. International Trade Commission determined that the U.S. tire industry was so threatened that a 55 percent tariff should be imposed on tires from China. Under the Bush administration such recommendations were often ignored. Obama must decide by a Sept. 17 deadline or we forgo temporary tariff protection.
Should Obama lead the country bravely toward the new knowledge economy of the 21st century or backward to try to re-establish the physical work economy of the 20th century? Many people believe that we cannot trust the virtual economy of bits and bytes to provide solid jobs for the future. Instead they want us to try to reestablish the economy of physical atoms that was so reassuring in the 20th century. Which path should Obama take in leading the country?
Does our future lie in raising prices in Wal-Mart and other discount stores where most Americans shop or in keeping prices low and leading our country toward the knowledge-based jobs of the 21st century? Some claim that we will never be able to compete with China with its low-wage workers even as shortages of such workers in China began to emerge just prior to the current recession. China in turn has been losing out to low-wage workers in Vietnam and other Southeast Asian countries. African low-wage workers no doubt will eventually take their turn in taking possession of low-wage jobs.
China has already figured this out and is moving to raise the knowledge intensity and quality of its products and the education of its people. President Obama knows this is the future, but his party faces elections in 2010. In the 2008 election he promised to protect American jobs from "unfair" foreign competition.
Foreign competition is only "unfair" in this sense if there is a fixed number of jobs. Economists know this idea as the "lump of labor" fallacy. In reality the number and quality of jobs is very dynamic and determined by the forces of supply and demand. Fiscal and monetary policy contribute to new demand along with rising export demand. New demand is being generated all the time for new products that didn't even exist in the 20th century. The problem is that old workers are trained in old, unskilled jobs or skilled jobs like welding or fork lift operations which are becoming automated as computers take over in manufacturing. Manufacturing production is not declining in America, but rather it is manufacturing employment that is declining in the face of "lights out" manufacturing where robots work through the night with no complaints and few breaks. Many of the jobs going to China would have gone to robots anyway. The jobs going to China, on to Vietnam and then on to Africa are just stopping briefly on their way to oblivion.
If you want job security in the 21st century don't learn welding. Instead learn what a relational database is. Learn a computer programming language. Learn how to use sampling to estimate the probability of an unlikely event. Learn how to create and use a collaborative filter. Learn what a Taylor series expansion is. Learn how to put together a business plan and how to determine if a business process is scalable or not scalable. These basics and many more can be learned on your own through Google search or Bing! Some of what you need to know to compete in the 21st century can be found in Wikipedia.
China's old guard leadership came from the engineering class. They understand all this. They know these low-wage manufacturing jobs are a flash in the pan that won't last. They are preparing China for the 21st century. It is much easier for them. They have no voters hanging on to the past to stand in their way. President Obama knows this too. Except he has to deal with the next election. President Kennedy wrote the book: "Profiles in Courage." Let's see if President Obama measures up.
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Also see:
H-1B visas, highly skilled immigrants, knowledge economy.
Freedom, democracy and Hillary Clinton's China trip.
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You Needed to do Some RESEARCH
Hate to break it to you Larry, but these tires are the low end ones which American tire manufacturers do not even make anymore. The tariff request is merely to raise the prices of these low end tires so there is not so much difference.
Once more, labor unions in bed with the manufacturers are wanting to screw the consumer. What about the poor person who you are going to screw my raising the price of their replacement tires?
the big 0, the messiah, needs to tell labor to go screw themselves, not the consumer...
Cheap tires compete with higher priced ones as price gap narrows
Yes, you are correct. Even Cooper Tire now produces all its cheaper tires in China. The union knows its workers are not going back to produce the cheaper tires. Rather they recognize that a consumer is more likely to upgrade to a higher quality tire when the cheap tire is no longer so cheap after a 55 percent increase in its price. When the price gap becomes small enough, people become willing to pay a few more dollars for the better quality tires.
That is why Cash-for-Clunkers was so interesting. People driving those awful clunkers that were all destined for the chrusher would have most likely just bought another used car. But the chance to be known as a "winner" for getting a $4,500 government handout towards a new car was too much to resist. They upgraded to a new car even though it probably cost them more money overall than if they had just bought another used one. It reminds me of that old saying: "Some people will go to great expense to get something for free."
Obama deny the union
Obama deny the union leadership it's whims, that's a hot one. Not likely Larry.