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CNN Fact Check: What really happened in China tire case?

By the CNN Wire Staff
updated 5:58 PM EDT, Tue October 23, 2012
STORY HIGHLIGHTS
  • The Chinese "were flooding us" with cheap tires, Obama says
  • "Gov. Romney criticized me for being too tough in that tire case"
  • Romney said Obama's action was "decidedly bad for the nation"

(CNN) -- In Monday's foreign policy debate, President Barack Obama said former Massachusetts Gov. Mitt Romney had criticized his administration for being too tough against China and bringing a protectionist case at the World Trade Organization.

The statement: Obama cited a case in which the Chinese "were flooding us" with cheap tires. "And we put a stop to it and as a consequence saved jobs throughout America. I have to say that Gov. Romney criticized me for being too tough in that tire case; said this wouldn't be good for American workers and that it would be protectionist," Obama said.

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The facts: In 2009, the Obama administration sought tariffs against China for dumping tires into the United States. The World Trade Organization upheld the tariffs.

On its website, Romney's campaign cites where the Republican candidate addressed the case in his 2010 book "No Apology."

"President Obama's action to defend American tire companies from foreign competition may make good politics by repaying unions for their support of his campaign, but it is decidedly bad for the nation and our workers," Romney said. "Protectionism stifles productivity."

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The result was indeed inherently protectionist, according to Douglas Paal, vice president for studies at the Carnegie Endowment for International Peace.

"It means it will raise prices for American consumers on tires, both domestic and imported," Paal said.

But the case was a minor one in the overall scheme of things, he added. Both sides have engaged in such symbolic activity, "but neither is willing to take action that would seriously affect economic relations between our two economies," he added.

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The subject of China has been raised over and over during the campaign, with each candidate accusing the Chinese of stealing American jobs through unfair trade practices.

In broad terms, both men offered similar views, even using some of the same language:

"China is both an adversary, but also a potential partner in the international community if it's following the rules," Obama said. "So my attitude coming into office was that we are going to insist that China plays by the same rules as everybody else."

"They're making some progress; they need to make more," said Romney, who vowed to label China a currency manipulator on his first day as president. "They have to understand we want to trade with them. We want a world that's stable. We like free enterprise, but you got to play by the rules."

First, has China really stolen U.S. jobs? The numbers say yes. Since China entered the World Trade Organization in 2001, the U.S. trade deficit with China "eliminated or displaced more than 2.7 million U.S. jobs," according to a report published in August by the Economic Policy Institute, a left-of-center think tank.

The primary category from which jobs have been lost has been in the manufacturing sector.

The candidates have complained because, while the United States allows the free market, in large part, to dictate how much a dollar is worth and how much people will be paid in the United States, China uses its power to keep wages low.

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So, while the Bureau of Labor Statistics says the average employer has to pay about $35 per hour in salary and benefits to hire a worker on a production line, a Chinese factory pays only about $1.36 per hour for the same work.

In response, many companies have moved jobs to China to take advantage of the lower wages. Consequently, Chinese products tend to be cheaper to buy all over the world.

The result has been that Chinese exports to the United States have soared in recent years, while U.S. exports to China have lagged far behind.

What can a U.S. president do about that?

Probably not much. If the United States were to raise trade barriers, China could do the same. If the United States were to forbid U.S.-based companies from shipping jobs to China, that might leave U.S. companies less competitive in the world market.

And if China were to say it is no longer interested in buying U.S. debt, that could make it harder for the U.S. government to borrow the money it needs to operate.

The conclusion: In the tire case above, Obama is correct in his characterization of Romney's position. In the larger case of what to do about U.S.-China relations, both candidates have promised to get tough. But that will hardly be the last word.

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