US President Barack Obama will launch a new enforcement action against China at the WTO for illegally subsidising exports in its auto industries, a move seen as a reply to Republican presidential rival Mitt Romney's accusations that Obama has been soft towards Beijing.
During his visit to Columbus and Cincinnati in Ohio later today, Obama would announce his move to launch an enforcement action against China at the WTO for illegally subsidising exports in their auto industries, a practice that is putting US auto-parts manufacturers at a competitive disadvantage and that is encouraging the outsourcing of Chinese auto-parts, according to a White House official.
The administration will take the next step in a WTO case launched in July against China's unfair imposition of duties on more than $3-billion exports of US-made automobiles, officials said.
They said the Chinese duties cover more than 80% US auto exports to China and disproportionately fall on General Motors and Chrysler products because of the actions that Obama took to support the US auto industry during the financial crisis.
"The key principle at stake is that China must play by the rules of the global trading system, when it does not, the Obama Administration will take action to ensure that American businesses and workers are competing on a level playing field," a White House official said.
According to the official, this action builds on the Administration's record of strong trade enforcement to date.
"We have more than doubled the rate of trade cases against China compared to the prior Administration and taken the first-ever safeguard action against a surge of Chinese tire imports," the official said.
Senior US officials allege that China is violating WTO prohibitions on export-contingent subsidies.
By providing a range of subsidies to auto and auto-parts producers directly linked to the firms' exports, China is not only violating WTO prohibitions on export-contingent subsidies, but also its own agreement to eliminate export subsidies when it joined the WTO in 2001, they said.
US estimates that China's illegal subsidies to auto and auto-parts exporters amounted to at least $1 billion between 2009 and 2011.
These subsidies may benefit up to 60% of Chinese auto-parts exports.
Officials say this action aims to compel China to unwind its prohibited export subsidy programme and to help level the international playing field for US businesses and workers in the auto and auto-parts industries.
"Specifically, the administration is now positioned to formally request that the WTO form a dispute settlement panel to consider our case: Sixty days have now elapsed since we initiated consultations with the Chinese on this issue in early July," officials said, alleging that China unfairly imposed antidumping and countervailing duties on approximately $3.3 billion US automobile exports to China.