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China-US car tariffs debate


07-06-2012 10:53 BJT

The US is challenging Chinese duties on some three billion dollars in auto exports.  Washington is lodging a formal complaint to the world trade organization, claiming china is misusing trade laws to tax American products.  China says it's adding duties on US cars to make up for unfair American subsidies.  And now the dispute is part of the US presidential campaign. 

Though the white house claims the timing of this trade action isn’t political, it certainly is convenient.  President Obama referred to it in Ohio today, where people make the cars subject to the Chinese tax.

U.S. president Barack Obama in full campaign mode Thursday, visiting the must-win state of Ohio.

Toledo, Ohio is home to a Chrysler plant which makes the jeep wrangler, and with sales up 34 percent on the year, the plant is adding jobs....jobs the president says are under threat from china.

President Barack Obama said, “Just this morning, my administration took a new action to hold China accountable for unfair trade practices that harm American auto makers.”

The US sent this letter to the world trade organization, saying china isn’t following WTO rules in its handling of a dispute over American auto exports.

In December, china imposed two years of duties on general motors and Chrysler vehicles with rates as high as 12.9 percent and others as high as 21.5 percent.  The move came just after the US imposed tariffs on Chinese tires.  The Chinese ministry of commerce defended the decision saying: “U.S. vehicles benefiting from subsidies and dumping on the China market have substantially damaged China’s auto industry.”

There's a lot on the line for America’s “big three” automakers.  Sales to china are “big” business, with GM selling two and-a-half million vehicles last year and ford selling more than a half million.  Chrysler is more vulnerable, selling just 35 thousand vehicles to china last year.

Ed Gerwin, Trade Attorney, said, "The United States has been trying to grow its auto exports and this could have an effect on its exports to China if these duties stand."

Trade attorney Ed Gerwin says the united states doesn’t bring trade actions it can’t win.

He says china may well have a case to bring against US subsidies of the auto industry, brought on by the 2010 bailout, but it needs to bring that case -- by the book.

Ed Gerwin said, “The concern on this side of the ocean is that we not use trade cases as a proxy for a trade war.”

Both china and the US will have 60 days to mediate the dispute at the WTO before a panel is asked to make a ruling.

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