Auto industry in middle of US-China trade conflict
By Paul A. Eisenstein, NBC News contributor
With both nations facing possible leadership changes, the U.S. and China appear heading for a serious battle over trade.
President Barack Obama, clearly intending to look tough, has authorized the U.S. to file a new trade complaint with the World Trade Organization over China’s subsidized auto and auto parts exports.But the Chinese landed the first punch today when they filed a complaint with the WTO over allegedly unfair duties the U.S. has enacted on 30 different types of goods including Chinese-made steel, paper and kitchen appliances.
China and the U.S. began squabbling over trade – and backing up the dispute with tit-for-tat sanctions – earlier this year. But the debate has been heating up for a number of years, especially over concerns about China’s lackadaisical attitude towards American intellectual property.
Both countries continue to insist they want to take steps to improve – rather than limit – free trade. But the timing may make it difficult for either side to back down from their increasingly confrontational approach.In recent years, critics contend, it’s become routine for the Chinese to copy American-made goods. Earlier this summer, in fact, Ford Motor Co. won a rare victory when it was able to block a Chinese competitor from producing a virtual clone of its big F-Series pickup. Despite some high-profile campaigns, however, American business officials say China has done little to stop the problem, especially when it comes to entertainment programming, such as films and videos.
President Obama will announce the details of the new WTO complaint during a campaign swing through Ohio, later today. The timing and location are anything but coincidental. China has been rapidly building up its automotive export business to the U.S., something that has a direct impact in Ohio, a manufacturing swing state that could play a pivotal role in outcome of the November presidential election. About 12 percent of Ohio’s workforce is employed directly or indirectly in the automotive sector.
And that’s not lost on Republican candidate Mitt Romney who has been accusing the White House of ignoring the trade threat from China.
The situation could grow worse if subsidized auto goods are allowed to continue freely entering the U.S. market, critics contend. The government complaint asserts the Chinese government provided about $1 billion in support for that country’s car parts manufacturers between 2009 and 2011, a move that allegedly benefited about 60 percent of the auto goods shipped to the U.S.
“Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest,” says an excerpt of the speech the President is expected to deliver during a stop in Cincinnati. “We will not let it stand.”
This is the 15thtrade complaint the U.S. has filed with the WTO since China joined that global trade regulating body in December 2001. But it’s also the second time since the beginning of the current presidential campaign that the Obama White House has taken action against China for alleged trade violations in the automotive sector. The first complaint targeted the claimed dumping of Chinese-made tires.
While the bitter presidential campaign may be spurring the White House to move with the latest trade complaint, China has similar motivation to fight back. The country plans to install its own new president during the 10-year party meeting tentatively scheduled for October. But things have not gone nearly as smoothly as planned.But that move prompted a rapid backlash, China firing back by placing over $3 billion in duties on U.S. automotive exports. The Chinese auto import tariffs vary widely by manufacturers but are stiffest for products built by Detroit’s Big Three. The Cadillac CTS and Buick Enclave, for example, are subject to 22% duties, the Jeep Wrangler and Grand Cherokee models 15%. The American-made Acura TL sedan, on the other hand, faces only a 4.1% mark-up.
Experts warn the Chinese will not be ready to back down on trade issues at this crucial point, especially not on a sector as crucial to their economy as the auto industry. Complicating the situation, Chinese domestic auto sales have unexpectedly weakened in recent months making exports all the more important.The all-powerful Communist Party was roiled by a corruption scandal involving rising star Bo Xili and his wife – the latter now convicted of murdering a British businessman. Complicating matters, Xi Jinping, the man expected to become president, has been virtually invisible in recent weeks raising serious questions about his health and the planned succession process.
So the shots fired today could trigger still more unless the Geneva-based WTO finds a way to achieve a face-saving compromise for both sides.
The nation's largest labor organization is backing President Obama's complain on Chinese trade.
"Today, President Obama took decisive action against the Chinese government’s unfair trade actions to ensure that American workers can compete fairly – and win good jobs in the global economy. U.S. workers and businesses suffer when countries violate global trade rules. Unfair and imbalanced trade contributes to slow job growth and a weak economic recovery," AFL-CIO president Richard Trumka said in a statement.
CINCINNATI – President Barack Obama took direct aim at China – and Mitt Romney -- on Monday with a World Trade Organization complaint about export subsidies and with stepped up rhetoric attacking Romney’s profiting from companies that shipped jobs to China.
The president announced the complaint at a campaign rally in Ohio, a state where the American auto industry supports one in eight people.
“Now, I understand my opponent has been running around Ohio, claiming… he’s going to roll up his sleeves and take the fight to China,” Obama said. “But here’s the thing: his experience has been owning companies that were called ‘pioneers’ in the business of outsourcing jobs to countries like China… Pioneers! Ohio, you can’t stand up to China when all you’ve done is send them our jobs.”
The WTO complaint alleges that China gave up to $1 billion to exporters of autos and auto parts between 2009 and 2011, distorting the market to the detriment of American manufacturers.
“These are subsidies that directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest,” Obama said. “…It is not right; it is against the rules; and we will not let it stand. American workers build better products than anybody. ‘Made in America’ means something. …When the playing field is level, America will always win.”
Obama’s announcement comes as China has become a flashpoint in the race for the presidency. Romney and Obama released dueling ads last week, with Romney accusing the president of going soft on China and Obama lobbing the off-shoring charge.
Romney immediately attacked the WTO complaint as “too little, too late” and said he wouldn’t wait until the last months of his presidency to take action “or to do so only when votes are at stake.”
“President Obama has spent 43 months failing to confront China's unfair trade practices,” he said in a statement. “Campaign-season trade cases may sound good on the stump, but it is too little, too late for American businesses and middle-class families.”
Romney said that from the first day of his presidency, he would pursue a “comprehensive strategy to confront China's unfair trade practices and ensure a level playing field where our businesses can compete and win.”
He did not elaborate on what specifically that strategy would entail.
The auto industry has become a central focus of the Obama campaign, affecting important swing states like Ohio. Obama’s decision to bail out the industry with government money was clearly opposed by Romney, something Team Obama is repeating as often as possible.
With the offshoring and China trade complaints, the campaign is seeking to dig even deeper on the same front. So far, the Obama strategy appears to be working. An NBC/WSJ/Marist swing state survey last week found the president had opened up a seven-point lead in Ohio.
At the rally here at Seasongood Pavilion in Cincinnati, where some 4,500 people gathered to see Obama, the president emphasized Romney’s opposition to another of his WTO complaints, that one against a surge in Chinese tires.
“You can talk a good game, but I like to walk the walk not just talk the talk. And my experience has been waking up every single day doing everything I can to give American workers a fair shot in the global economy. When other countries don’t play by the rules, we’ve done something about it,” he said. “We’ve brought more trade cases against China in one term than the previous administration did in two – and every case we brought that’s been decided we won. When Governor Romney said stopping an unfair surge in Chinese tires would be bad for America, bad for our workers, we ignored his advice – and we got over 1,000 Americans back to work creating tires here in America.”
Republicans immediately disputed that figure, pointing to a Wall Street Journal article that reported that although the action stopped the surge in Chinese tires, they were soon replaced by tires from Thailand, Indonesia, Mexico and elsewhere.
It is the second time Obama has announced a WTO complaint against China during a trip to Ohio (The last time was in July); although White House officials insisted the timing was entirely coincidental.
“This is an announcement that was months in the making,” deputy press secretary Josh Earnest told reporters aboard Air Force One Monday.