Domestic Bicycle Tire and Tube Industry Letter to the Speaker of the House and the President of the Senate Transmitting a Report.

Dear Mr. Speaker: (Dear Mr. President:)

In accordance with section 203 (b) (2) of the Trade Act of 1974, enclosed is a report to the Congress setting forth my decision that import relief for the domestic bicycle tire and tube industry is not in the national economic interest, and explaining the reasons for my decision.

Sincerely,

JIMMY CARTER

IMPORT RELIEF ACTION

BICYCLE TIRES AND TUBES

As required under section 203(b) (2) of the Trade Act of 1974, I am transmitting this report to Congress setting forth the action I will take with respect to bicycle tires and tubes covered by the affirmative finding on September 1, 1978 of the U.S. International Trade Commission (USITC) under section 201 (d) (1) of the Trade Act. As my action differs from that recommended by the USITC, I have included the reasons for my decision.

After considering all relevant aspects of the case, including those considerations set forth in section 202(c) of the Trade Act of 1974, I have determined that import relief for the domestic bicycle tire and tube industry would not be in the national economic interest for the following reasons:

(1) The imposition of import relief in the form of a tariff increase would not be an effective means to promote the permanent adjustment in the domestic industry. The sole remaining domestic producer has the most modern plant available, and very little can be done to improve current operating efficiency. In addition, corporate profits are high, and the profit margin on bicycle tires and tubes remains respectable in spite of low capacity utilization levels.

(2) At current profit levels, it is unlikely that the remaining domestic manufacturer will cease producing bicycle tires and tubes. Should the corporation eventually decide to terminate production, much of the plant's equipment could be modified to produce other kinds of recreational tires made by the company.

(3) The relative stability in the domestic producer's market share indicates that domestic demand is less price sensitive than is import demand. Consequently, its market for domestically produced tires and tubes is expected to remain intact.

(4) It is estimated that any loss in employment resulting from a denial of import relief would be small, and that those separated would be eligible for adjustment assistance. The Department of Labor estimates that the reemployment prospects are probably fair for potentially separated workers.

(5) Import relief would be inflationary. It is estimated that the consumer cost of the relief recommendation made by the USITC would be between $4.4 and $7.5 million for the first full year of relief.

(6) The foreign policy consequences of granting relief measures are adverse. The world .trading community would view this as a sign of growing protectionist sentiment. Moreover, because other petitions of the industry are now being investigated under the antidumping and countervailing duty statutes, it would also be seen as an attempt to harass foreign exporters through duplication of remedies.

(7) A duty increase such as recommended by the USITC will not place effective restraints on import competition but may merely accelerate the movement of production facilities out of Korea and Taiwan and into such countries as India, Indonesia, and Thailand.

(8) Provision of import relief would subject U.S. jobs in other industries to possible foreign retaliation against U.S. exports or compensation by the United States in the form of reduced import restrictions on other products.