U.S. launches automotive trade case against China
The White House says China's government is providing prohibited subsidies to auto and auto parts producers in 12 designated "export bases." The subsidies were worth $1 billion between 2009 and 2011, U.S. officials say.
WASHINGTON (Reuters) -- The United States said today it had launched a new trade case against Chinese auto and auto-part export subsidies that threaten jobs in Ohio and other states key to the outcome of this year's presidential election.
"Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade," U.S. Trade Representative Ron Kirk said in a statement. "China expressly agreed to eliminate all export subsidies when it joined the WTO in 2001."
The U.S. Trade Representative's office said it was also taking the next step in a separate World Trade Organization case launched this year against Chinese duties on U.S. auto exports.
The request, to be made at the WTO’s next Dispute Settlement Body meeting on Sept. 28, stems from the Obama administration’s July 5 complaint accusing China of imposing unfair levies on $3.3 billion of U.S. vehicle exports, mostly by GM and Chrysler. That filing came on the same day Obama began a bus tour of Ohio and Pennsylvania.
Hours after the U.S. move today, China filed a complaint at the WTO to challenge a new U.S. law on "countervailing duties," or tariffs intended to combat export-promoting subsidies on products including tires and steel.
Addressing 4,500 supporters in a crucial swing state where one in eight jobs is tied to the auto industry, President Obama said Romney has claimed he’ll “take the fight to China,” even though as a private equity executive he “made money investing in companies that uprooted from here and went to China.”
“Ohio, you can’t stand up to China when all you’ve done is sent them our jobs,” Obama told the crowd in Cincinnati.
Romney has attacked Obama for what he says is an overly cautious approach to pressuring China into observing international norms for trade, foreign exchange, and patents and trademarks.
The United States announced the complaint 50 days before the Nov. 6 presidential election and 15 days before early voting starts in Ohio. The state has 54,200 residents employed by the car-parts industry and 12.4 percent of the state’s total employment related to the auto sector.
It also comes as Romney, who opposed the 2009 government rescue of General Motors and Chrysler Group, has stepped up attacks on Obama on trade, saying the president has been too timid in confronting Chinese leaders. He said today the WTO complaint is inadequate.
“It is too little, too late for American businesses and middle-class families,” Romney said in an e-mailed statement. “I will pursue a comprehensive strategy to confront China’s unfair trade practices and ensure a level playing field where our businesses can compete and win.”
In making their case to the world trade body in Geneva, Switzerland, U.S. officials say the Chinese government is providing prohibited subsidies to auto and auto parts producers in 12 designated "export bases." Illegal subsidies were worth $1 billion between 2009 and 2011, the administration official said.
The subsidies put U.S. component manufacturers at a competitive disadvantage, which encourages the outsourcing of car-parts production to China, U.S. officials said.
"The key principle at stake is that China must play by the rules of the global trading system," a White House official said. "When it does not, the Obama administration will take action to ensure that American businesses and workers are competing on a level playing field."
The trade enforcement steps come as Obama and Romney vie for a few important states, including Ohio, that could determine the outcome of the Nov. 6 presidential election. Obama holds a narrow lead in polls, but the sluggish economy and unemployment rate have weighed on the president's re-election bid.
In recent days, Obama's handling of foreign affairs has jumped to the forefront of the campaign debate as tensions boil over in the Middle East. China trade case may shift the focus to the president's management of the sometimes contentious U.S. relationship with China and his support for the auto industry, which faced the prospect of auto maker bankruptcies in the depths of the financial crisis and recession.
Romney has accused Obama of making too many concessions to the Asian powerhouse and has promised to be tougher on issues such as trade and currency manipulation. The Obama campaign has frequently stated that, during his business career, Romney was responsible for sending many U.S. jobs overseas, including to China.
In Ohio, the auto-parts industry directly employs 54,200 people, the administration official said. When related industries like steel, aluminum, plastics and electronics are taken into account, the auto sector supports about 12.4 percent of the state's total employment, the official added.
Obama constantly reminds Ohio audiences of his administration's decision to throw a lifeline to auto companies during the recession and Romney's opposition to that bailout.
Beijing's willingness to hold the value of its yuan currency low, making its goods cheap abroad, has been a sore point between the United States and China. As a result of U.S.-led international pressure, China has let the yuan appreciate in recent years.
Even so, the U.S. trade deficit with China hit a record $295 billion in 2011.
Romney has pledged to formally declare China a currency manipulator on his first day in office. The Obama administration has declined to label China in seven semi-annual Treasury Department reports.
Administration officials say they have made progress with China on the currency issue over the past few years without ratcheting up tensions by formally labeling Beijing a currency manipulator. The next semi-annual report is due on Oct 15.
In the meantime, Beijing showed no such reticence to invoke trade rules, slapping duties on U.S. auto exports in December 2011 on roughly 92,000 autos and SUVs, worth $3.3 billion in annual U.S. exports.
Those duties fell disproportionately on General Motors and Chrysler because of the actions that President Obama took to support the U.S. auto industry during the financial crisis.
The trade duties cover more than 80 percent of U.S. auto exports to China, including cars manufactured in Toledo and Marysville, Ohio, and Detroit and Lansing, Michigan.
China's complaint potentially affects close to 30 products that have previously been targeted by U.S. duties, a trade official familiar with the case said.
He said the complaint was aimed at a U.S. law passed in March which allowed the United States to apply countervailing measures to Chinese exports retrospectively.
Commerce Ministry spokesman Shen Danyang said China hoped the United States could "correct its mistaken policy and appropriately resolve China's concerns".
"China has, under various circumstances, repeatedly reiterated that it resolutely opposes the abuse of trade remedy regulations, opposes trade protectionism, and will staunchly exercise its WTO-member rights to protect the legal rights of its domestic industry," Shen said.
In a brief statement on the initial filing by China, the WTO said the products included steel, tires, magnets, chemicals, kitchen appliances, wood flooring and wind towers. China will file a full complaint with more details in the next few days.
Under WTO rules, China's filing of the complaint has set the clock ticking on a 60-day period during which the United States can try to settle the dispute in bilateral talks. After that, China could ask the WTO to adjudicate.
Today’s WTO challenge is the 15th lodged by the United States against China, which joined the Geneva-based trade arbiter in December 2001, and means the two governments must hold talks for at least two months in a bid to resolve the matter. If the discussions fail, U.S. officials can ask WTO judges to rule.
Josh Earnest, a White House spokesman, denied the administration tied the timing of the challenge to Obama’s appearance in the swing state.
“These cases are months in the making,” Earnest told reporters on Air Force One. “We’re not going to delay until next year an action” that would protect workers because of the presidential campaign.Contact Automotive News