A trade war appears inevitable given the amount of money and number of jobs at stake in the economies. Both leaders are also master politicians, and need to be to survive.
The Obama Administration filed a complaint against the Communist Chinese government at the World Trade Organization today. In a statement, WTO said, “the United States notified the WTO Secretariat of a request for consultations with China on China’s measures providing subsidies such as grants, loans, forgone government revenue, the provision of goods and services and other incentives contingent upon export performance to automobile and automobile-parts enterprises in China.”
No other details were provided by WTO, which is now caught in the American presidential election. Consultations are the first step in the WTO dispute settlement process. If the matter is not resolved through consultations within 60 days, and they rarely are, the United States may request the establishment of a WTO dispute settlement panel.
The Chinese immediately fought back, disputing at WTO today U.S. countervailing and anti-dumping measures applied to a wide range of products exported by China to the U.S., including paper, steel, tires, magnets, chemicals, kitchen appliances, wood flooring and wind towers.
Details of the trade action came from Administration officials who briefed media before the announcement is made at a campaign stop in Cincinnati, Ohio. Votes in the industrial Midwest have become crucial in the 2012 presidential campaign, which is being conducted with the largest amount of special interest money in U.S. history courtesy of the corruption of both political parties, abetted by the U.S. Supreme Court, who in an earlier session ruled that slave Dred Scott, a human being, was property.
According to Administration officials, who talked about the case on the condition of anonymity before the announcement, China has provided at least $1 billion in export-contingent subsidies between 2009 and 2011 in violation of WTO rules. It is the first action of the Interagency Trade Enforcement Center (ITEC) at the Commerce Department created by the President earlier this year to identify and end unfair foreign trade practices.
In January, the UAW and USW along with other unions, U.S. Senators Sherrod Brown, Bob Casey, Debbie Stabenow and Congressman Sandy Levin listed an array of practices and policies adopted by China to promote its auto and auto parts sector to the disadvantage of foreign producers and their workers. Following this, 189 Members of Congress wrote to the President, asking that action be initiated by his Administration to address China’s practices.
The unions claim that the U.S. has been the principal target of China’s efforts with its policies contributing to the loss of roughly 400,000 auto parts sector jobs since 2001. Last year, China sold more than $11 billion of auto parts in the U.S., an increase of nearly 900% since 2000. At present growth rates, China’s exports of auto parts to the U.S. would reach almost $100 billion.
The latest WTO action comes after another one announced in July where the U.S. protested China for imposing duties on more than $3 billion in American-produced automobiles. China joined WTO in 2001 and agreed to stop unfair trade practices.
“The effort will challenge China’s use of export-contingent subsidies that are illegal under the terms of China’s WTO membership,” said USW International President Leo W. Gerard. “These subsidies of at least $1 billion have helped fuel 60% of Chinese auto parts exports. These policies, and others, are the foundation upon which the Chinese want to become a dominant player in the auto and auto parts sector and are identified in their 12th Five Year Plan and other actions.”
Strangely, the UAW did not immediately issue a statement, but the AFL-CIO, the leader is the progressive union movment, did. “Make no mistake: Much more needs to be done to reform our trading system and enforce our trade laws vigorously and consistently,” Richard Trumka, the head of the union confederation. “With today’s action, the President is forcefully addressing the Chinese government’s predatory policies in the auto and auto parts sector, as well as demonstrating the administration’s willingness to self-initiate unfair trade cases where needed.”
Late in the day UAW president Bob King did finally issue a statement saying, among other things, “Auto-parts manufacturing directly employs nearly half a million American workers, and the auto sector overall supports up to 8 million American jobs – and today’s action will help those workers compete on an even footing.”
(This story has been modified from its original version to include more quotes and facts as they became available. – editor)
“The Obama Administration is committed to protecting the rights of nearly 800,000 American workers in our $350 billion auto and auto parts manufacturing sector. We insist upon having a level playing field on which our world-class manufacturers can compete. Today we are continuing to make it clear to our trading partners that we will fight to support each job here at home that this sector supports,” said Ambassador Kirk. “Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade. China expressly agreed to eliminate all export subsidies when it joined the WTO in 2001. China benefits from international trade rules and must in turn live up to its international obligations.”
“The export subsidy program that we are challenging today is implemented through dozens of Chinese legal instruments,” said Ambassador Kirk. “We are in a position to address this trade problem because the Administration’s newly created Interagency Trade Enforcement Center (ITEC) has provided crucial investigative and analytical resources to this effort. This is one example of how ITEC, relying on a whole-of-government approach, is expanding and accelerating the United States’ trade-enforcement capabilities and activities.”
This is the latest in a series of enforcement actions the Administration has taken to ensure that China complies with its WTO commitments. In 2010, the United States challenged China’s local-content subsidies to its wind power equipment manufacturers, resulting in China’s revocation of the subsidy program. In three separate WTO disputes initiated between 2009 and 2011, the United States is challenging unfairly imposed duties China places on, U.S. automobiles; U.S. steel products; and U.S. poultry products. Earlier this year, the United States successfully concluded a challenge to China’s export restraints on key industrial raw materials and, in March, launched a dispute against China’s export restraints on “rare earths,” a class of raw materials used in high-tech and clean-energy products.
In July, the United States prevailed in its challenge against China’s market access restrictions on U.S. providers of electronic payment (e.g., credit and debit card) services. The request for consultations also includes transparency-related claims addressing China’s failure to notify the subsidies at issue to the WTO.
Separately, the United States today requested that the WTO establish a dispute settlement panel to address China’s imposition of anti-dumping and countervailing duties on more than $3 billion in exports of American-produced automobiles. The United States and China tried to resolve the matter following the U.S. request for formal dispute settlement consultations in June, but the consultations did not succeed. Therefore, the United States is taking the next step in the WTO dispute settlement process. This action underscores yet again the Administration’s commitment to enforcing U.S. rights at the WTO on behalf of U.S. auto workers and their families.
Ron Kirk is the U.S. Trade Representative