The US government has launched a new trade case with the World Trade Organisation against Chinese vehicle and parts export subsidies that Trade Representative Ron Kirk said were unfair and distorted international trade. The latest challenge contests $1 billion in subsidies and follows on from an earlier complaint in July that accused China of imposing unfair levies on $3.3 billion of US vehicle exports, mostly by GM and Chrysler.
"These are subsidies that directly harm working men and women on the assembly lines in Ohio and Michigan and across the Midwest," said president Obama during a campaign speech in Cincinnati this week. “We are going to stop it. It's not right, it's against the rules, and we will not let it stand.”
In response China has launched its own complaint to the WTO alleging that the US was unfairly calculating the new tariffs and imposing countervailing and anti-dumping measures on a wide range of products including paper, steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers.
According to US Department of Commerce figures America’s vehicle trade deficit with China reached $5.3 billion last year, a 56% increase on the previous year. Meanwhile, the deficit on automotive parts reached $10.5 billion, 20% up on 2010. The figures show that in 2011 the value of US exports of vehicle parts to China reached $1.5 billion while the value of imports from China hit $12 billion.
In December last year China’s Ministry of Commerce accused the US of dumping and subsidising vehicles in the country causing damage to China’s domestic industry and applied levies on large vehicles. For GM it meant a 22% increase on some SUVs and vehicles with engine capacity above 2.5 litres. Chrysler faced a 15% penalty. Ford does not export US-made vehicles to China.
This was on top of the 25% increase in the cost of a US imported car through existing tax and duties imposed by the Chinese government. The combination makes US-built vehicles cost three times as much in China.
Neither Chrysler nor GM would comment on the move by the US administration.