Tyre duties highlight protectionist pressures

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Globalisation flourished whilst economic growth was strong. Jobs lost in Western countries were replaced by new jobs. Whilst cheaper production offshore kept consumer prices low, as well as bringing more people into the world economy.

But today’s economic downturn means this virtuous circle is turning vicious. Western countries are becoming more protectionist and hope to repatriate offshore jobs. Thus the USA, with nearly 10% unemployment, has now imposed a 35% import duty on Chinese tyres.

The justification is the 3-fold increase in China’s US market share to 17% between 2004-8, whilst 4 US tyre factories shutdown. Such “market disruption” allows punitive duties to be imposed under World Trade Organisation rules. Thus. as we forecast in our landmark ‘Feedstocks for Profit’ Study last year, regionalism is now making a comeback.

Chemical companies supplying the tyre industry will be amongst the first to have to consider relocating their plants back home. But with high oil prices also increasing the cost of extended supply chains (as P&G have noted), many others will need similar debates as the downturn continues.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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