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Obama Widens China Trade Fight in Auto Levy Complaint

July 06, 2012

Obama Widens Trade Fight With China in Complaint Over Auto Levy

A security guard at the General Motors open storage depot in Shenyang. Photograph: EPA

President Barack Obama expanded U.S. trade complaints against China, accusing the nation of imposing unfair taxes on American vehicles, mostly from General Motors Co. (GM:US) and Chrysler Group LLC.

Duties on more than $3 billion in exports cover more than 80 percent of U.S. auto shipments, including Jeep’s Wrangler and Grand Cherokee, both made by Chrysler, and GM’s Buick Enclave and Cadillac CTS, according to a White House statement on a complaint it filed yesterday at the World Trade Organization.

“Americans aren’t afraid to compete; we believe in competition,” President Barack Obama said in Maumee, Ohio, near a Jeep factory at the start of a two-day campaign bus tour yesterday. “As long as we’re competing on a fair playing field, instead of an unfair playing field, we’ll do just fine.”

The U.S. complaint adds to an expanding list of grievances between the nations. Disputes over issues such as rare-earth minerals, solar panels and wind turbines by China and the U.S. in recent months have led some analysts to speculate the nations are headed for a trade war. The U.S. has complained about lack of access in China for products including poultry, tires and music.

China Duties

China, the world’s biggest car market, said on Dec. 14 it planned to impose anti-dumping duties as high as 12.9 percent on GM autos and 8.8 percent for Chrysler vehicles. China said U.S. taxpayer support of the two carmakers amounted to a government subsidy that was illegal under WTO rules, an allegation the Obama administration rejects.

The U.S., which provided aid to the companies in 2008 in return for stock, holds a 32 percent stake in GM. It sold its Chrysler holdings to Italy’s Fiat Spa (F) a year ago.

The Chinese levies, which cover about 92,000 vehicles, also were applied to vehicles produced by the U.S. units of Bayerische Motoren Werke AG (BMW) and Daimler AG (DAI), which pay 2 percent and 2.7 percent respectively.

China Response

China will “appropriately” deal with the latest U.S. complaint according to the WTO’s dispute settlement procedures, the Chinese commerce ministry said in a statement on its website.

Kevin Frazier, a spokesman for Chrysler, declined to comment on the complaint. A GM spokesman didn’t return calls.

The complaint at the Geneva-based WTO is meant to remind voters of Obama’s steps after taking office to rescue GM and Chrysler and blunt criticism from presumptive Republican presidential candidate Mitt Romney that Obama has been too soft on China. Obama began his bus tour of northern Ohio and western Pennsylvania, areas hit by declining U.S. manufacturing, in a suburb of Toledo, Ohio, that is home to a Jeep Wrangler plant.

“The deck in China is stacked against American automakers and workers, and this case will help to level the playing field,” Scott Paul, executive director of the Washington-based Alliance for American Manufacturing, said in a statement. Of 18 million vehicles sold in China, less than 1 percent were made in the U.S. “despite the fact that the Detroit Three brands are growing more popular every day,” Paul said.

Auto Helps Revival

China is Ohio’s third-largest export market, with shipments to the Asian nation valued at $2.7 billion. Ohio’s exports to China have climbed more than eightfold since 2000 while exports from the state to the rest of the world only grew 68 percent.

When China imposed the duties, its car sales were rising at the slowest pace in 13 years, putting pressure on domestic producers to consolidate as GM and other foreign carmakers posted gains.

“The auto industry is helping turn our economy around by reviving manufacturing facilities across the nation,” Senator Sherrod Brown, an Ohio Democrat, said in a statement yesterday. “We’re at risk of this progress being undercut if we allow China to continue to cheat and break trade laws.”

Senator Rob Portman, an Ohio Republican, joined Brown in December asking Kirk to investigate China’s duties on autos. Kirk was asked to use “all available tools” to insist China competes fairly, Portman and Brown wrote in a Dec. 19 letter.

Representative Mike Michaud, a Maine Democrat and chairman of the House Trade Working Group, and 26 colleagues in February urged Obama to combat China’s trade policies they said blocked U.S. cars from China’s market.

“China has been violating international trade laws for 10 years, and Americans are paying the price for it,” Michaud said yesterday in a statement praising the administration action.

Import Tariffs

On May 17, the Commerce Department announced tariffs of 31 to 250 percent on imports of Chinese solar cells. On May 30 the agency proposed duties as high as 26 percent on imports of wind- towers from China, and the U.S. International Trade Commission determined that imports of high-pressure steel cylinders from China harm American producers.

On June 17, the WTO determined that China unfairly imposed anti-dumping and anti-subsidy duties on more than $200 million worth of U.S. steel products.

Obama and Romney, a former Massachusetts governor, have positioned themselves to take a tough stance on China this election year.

“That’s why my administration brought trade cases against China at a faster pace than the previous administration -- and we’ve won those cases,” Obama said yesterday.

Romney has said that on his first day in office, he will issue an executive order labeling China a currency manipulator.

Yesterday’s request for consultations is the first step in WTO dispute proceedings and means the governments must now hold talks for at least two months in a bid to resolve the dispute. If the talks fail, the U.S. can ask WTO judges to rule.

To contact the reporters on this story: Jennifer M. Freedman in Geneva at jfreedman@bloomberg.net; William McQuillen in Washington at bmcquillen@bloomberg.net

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; James Hertling at jhertling@bloomberg.net


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