The United States on Monday filed a broad trade case against China at the World Trade Organization, alleging unfair subsidies for exports of cars and auto parts.
The case comes at a critical time in the United States presidential campaign, as auto manufacturing states in the upper Midwest like Michigan, Wisconsin and particularly Ohio have turned into crucial battlegrounds. But the case may not make any difference in terms of jobs for many months, as WTO cases typically take a year and a half before a final decision is reached, and sometimes longer.
Hours after news of the American move began to circulate, but before the trade case was actually filed in Beijing, China’s commerce ministry announced in a statement on its Web site that it was filing its own WTO case against the United States, alleging unfairness in how the United States calculates the penalty tariffs in anti-subsidy cases.
The Chinese action appeared to be coincidental, as the Chinese government seldom responds quickly to trade actions — indeed, the Chinese commerce ministry statement made no mention of the American action. The ministry had no response all day to questions relayed by phone and fax in the morning about the American action.
The case brought by the United States on Monday is the latest sign of a greater willingness by Western governments to confront China. The American action on trade comes just 11 days after the European Union agreed to start the world’s largest anti-dumping action ever, against imports of solar panels from China.
Obama planned to talk about the move Monday during a visit to Ohio, a place where the president is trying to capitalise on his bailout of the auto industry in 2009. A poll by NBC News, The Wall Street Journal and Marist College last week showed Obama building a significant lead over the Republican challenger, Mitt Romney, in Ohio.
In its WTO filing, the United States accuses China of providing at least $1 billion worth of subsidies from 2009 to 2011 for worldwide exports of cars and auto parts.
While $1 billion may sound like a large number, Chinese exports of automobiles and auto parts totaled $56 billion during this period, according to Chinese customs data. So even if China were forced by the WTO to reverse the subsidies, the effect on Chinese exporters’ total costs might not be significant.
While China exports virtually no fully assembled cars to the United States, it has rapidly expanded exports to developing countries, and those exports compete to some extent with cars exported from or designed in the United States.
Ohio has suffered heavily from job losses that have coincided with surging imports of auto parts from China. Auto parts employment in the United States has dropped by about one-half from 2001 to 2010, as imports from China grew nearly sevenfold over the same period, according to data provided by the Office of the United States Trade Representative. Auto parts manufacturers directly employ 54,200 people in Ohio, and when suppliers like steel makers are included, the auto industry accounts for 850,000 jobs in the state, or 12.4 per cent of total employment there.
But auto industry experts debate the extent to which those imports have been directly responsible for the closing of factories and for cutbacks at other plants, as ever-increasing automation has also played some role.
The slowing of the United States car market since 2008 has had an effect as well, although sales have begun to recover in recent months.
Romney, the Republican presidential nominee, has repeatedly accused the Obama administration of not doing enough to challenge China on trade and currency policies. But the timing of the administration case, so soon before the elections, makes it likely that the Chinese government will accuse Obama of playing politics — an accusation already made by Chinese officials, particularly those with close ties to affected industries, over recent trade cases involving solar panels.
“President Obama has spent 43 months failing to confront China’s unfair trade practices,” a statement issued Monday by Mitt Romney’s campaign said. “I will not wait until the last months of my presidency to stand up to China, or do so only when votes are at stake.”
Chinese officials strongly criticised Obama last winter for not blocking solar panel trade cases against China, accusing him of playing politics with trade. But as Romney has called for a more confrontational trade policy toward China, the state media have become highly critical in recent weeks of Romney as well.
“It is rather ironic that a considerable portion of this China-battering politician’s wealth was actually obtained by doing business with Chinese companies before he entered politics,” Xinhua, the state-run news agency, said in a commentary Friday.
The Romney campaign has said that Bain Capital, the private equity firm of which Romney was a founder, mainly helped build companies in the United States, not China.
Asked whether the trade cases against China were timed for political effect, a senior administration official said by email that. “President Obama has prioritised enforcement of Americans’ rights in the global trading system from day one, and this administration has a consistent record of action to support American jobs.”
The senior administration official was not authorised to comment on the politics of the issue and insisted on anonymity for this reason.
The Chinese case against the United States had long been expected by trade lawyers. The case cites a long-running legal battle waged by importers in the United States courts over whether the Commerce Department’s methodology in calculating anti-subsidy tariffs results in double-counting for nonmarket economies like China’s when imports from the same country are also subject to anti-dumping tariffs. Congress passed legislation earlier this year to fix the reported double-counting of anti-subsidy tariffs, also known as countervailing duties. But importers contend that the legislation should not be applied retroactively.
Carol Guthrie, a spokeswoman for the Office of the United States Trade Representative, said on Monday that the United States was reviewing the new Chinese case at the WTO and would respond. The legislation earlier this year, and prior anti-subsidy rulings cited by China in its WTO petition on Monday, all comply with WTO rules, she wrote in an email.
The global trading system has long been founded in part on the assumption that companies will act to defend operations in their home countries, and will file anti-dumping and anti-subsidy cases against imports. But that logic has eroded in recent years in the case of China as practically every Western multinational company — and a growing number of smaller companies as well — has moved factories and other operations to China and become reluctant to risk retaliation by filing trade cases.
Unions have the legal standing to bring many kinds of trade cases in the United States. But with the exception of the United Steel Workers union, which filed a legal petition in 2010 for the administration to review imports of energy-efficient technology, unions have been leery of filing trade cases because of the six-figure and even seven-figure legal fees involved.
Only countries can file WTO complaints.
Michael Wessel, the longtime trade adviser to the United Steel Workers, said that unions were eager for the government to file cases.
“The landscape has changed with multinational companies often having operations in both countries and reluctant to act for fear of Chinese retaliation or because they’re profiting from China’s policies,” he said. “This may be the start of a major shift in the US approach to trade enforcement that’s necessary.”
When the Obama administration took office, it sought economic cooperation with China on many issues and was initially cautious about bringing large trade cases, although it did file a steady stream of lower-profile trade cases on products like certain kinds of flat-rolled steel, chicken broilers and electronic payment services and industrial minerals like bauxite.
The conspicuous exception was a decision in September 2009 to impose tariffs on tires imported from China, and even that decision was to some extent forced by complex legal deadlines in the United States.
But the administration has filed trade cases this year on rare earth metals and on autos and has started to take a stronger tone in general. In addition to accusing China on Monday of subsidising exports of autos and auto parts to the United States, the Obama administration also took another legal step on Monday to push forward a recently filed WTO case accusing China of unfairly putting anti-dumping tariffs on American car exports last winter.
The shift has come as China has begun to play a somewhat less important part in Treasury bond auctions, as Chinese trade surpluses erode and capital flight from China increases, although the Obama administration has avoided any linkage whatsoever of bond policies.
China remains the largest foreign holder of Treasuries, however.
John H Cushman Jr and Peter Baker contributed reporting from Washington.
© 2012 The New York Times News Service
