With news on anti-dumping investigations making industry headlines, we have subsequently seen more countries considering anti-dumping duties (ADD) against China. The US has had tariffs in place on some types of Chinese tyres since 2008, while even more duties have been legislated over the past year. Recently, the Indian government has announced that it is also looking at putting similar legislation in place. Investigating a demand from the rubber industry body, India are currently looking at creating similar ADDs and increasing the cost of many imported Chinese tyres.
The ultimate reason for these tariffs is that China has been very successful at reducing production costs and manufacturing large numbers of quality tyres. As someone familiar with the tyre industry, I have to say that low-cost, high-quality products are only going to benefit the world market. The demand for tyres is increasing and will continue to do so. With emerging markets like India and Africa just coming into the picture, there’s a real need for these Chinese-manufactured products.
Of course, this is a complex situation that can be examined from many different angles, but here at Zenises, our customers’ point of view always comes first. We distribute tyres at a global level, with a presence in close to thirty countries. Zenises is dedicated to offering premium tyres at the best possible value and we will work with manufacturers that produce this type of product, regardless of where they happen to be located.
There are a number of misconceptions regarding these duties, so let’s take a closer look at the specifics of the case. The anti-dumping duty (ADD) in question is the method the World Trade Organisation (WTO) has chosen to regulate sale and production costs in different countries. The intended goal of the policy is to ensure that exporting countries don’t have an unfair advantage over internal manufacturers when it comes to product pricing. A country that suspects dumping, in this case India, can launch an investigation into production in another country, such as China, to ascertain if there is indeed a valid case for the accusation. Independent researchers need to find data showing that the cost of tyre production in China does actually exceed the price at which these tyres are being sold in India. In other words, the country must prove that the low cost is due to government subsidies rather than fair market factors.
When China entered the WTO in 2001, it exhibited a sincere commitment to reforming the economy and creating an open market that was favourable to foreign investment. Nevertheless, some suspicions, from the US especially, led China to accept considerably harsher conditions than most developing countries do upon entry. China has yet to be granted full Market Economy Status (MES) within the WTO, in spite of internal reforms that reduce government subsidy and support foreign investors. China’s lack of MES means that countries interested in adding an ADD to Chinese exports can use statistics provided by a third party rather than China’s own internal manufacturing statistics.
Government support may have helped to initiate tyre development in China, but currently the industry is thriving on product advancement and state of the art facilities. At Zenises, we are happy to count a number of excellent Chinese brands among our products, including the world famous Westlake tyres, and Z Tyre (famous for selling the most expensive tyres in the world as certified by the Guinness Book of World Records). I obviously can’t speak for every Chinese tyre; examples of poor quality manufacturing can be found in every country around the world, but this shouldn’t make us deny the merits of factories like Zhongce Rubber, one of the top ten tyre manufacturers in the world, which has been producing quality rubber products for years.
If the Indian government chooses to add a new tariff, this will punish both Chinese manufacturers and Indian consumers. The rubber industry in China will see a production decline; at the same time, Indian drivers will be forced to purchase tyres at a higher price. India’s government will be ignoring the immense advantages a competitive neighbour like China can bring.
We have to ask ourselves why the trade deficit between India and China is currently around 50 billion. Why have Indian exports to China increased by only 22 per cent over the past ten years, while Chinese exports to India have grown by 500 per cent? The middle class in China is expanding almost exponentially, so the market for imported consumer products inside the country should more than offset Chinese exports. Perhaps a campaign aimed at reducing this trade deficit with China would do more to support Indian rubber manufacturers than a tariff on imported tyres.
The bigger picture here, I believe, is how governments are approaching trade with China. At present, many countries seem to see the Chinese manufacturing capacity as a threat, yet at the same time these countries have not found a way to satisfy their own internal consumer demand or adequately support their own manufacturers.
When we advocate a free global market, we should support manufacturers around the world who work hard to offer quality products at low prices. This is what the Chinese have accomplished in the tyre industry, leading to an increase in jobs and affluence in China. By adding unfair ADD’s, we are limiting the scope of China’s success, and in the process we are also curbing worldwide progress and job growth. It seems countries would do better to follow China’s lead and increase manufacturing efficiency so that all these new emerging markets can be an opportunity for growth.