The Obama administration announced yesterday that it has filed a complaint at the World Trade Organization (WTO) with China over its tariffs on large vehicles exported from the United States to China. This is the seventh complaint filed by the administration against China, and the White House noted that “the previous six have all been successful.”1 The Obama administration should be applauded for its continuing support of the U.S. auto industry, and for this action, which will help preserve U.S. jobs supported by about $3 billion of U.S. exports in 2011.
Much more needs to be done to stop unfair trade and industrial policies in China’s auto industry, which the Chinese government has targeted as a “pillar industry,” for development. Between 2001 and 2011, according to a report by EPI Research Associate Usha Haley, “the Chinese auto parts industry has received about $27.5 billion in subsidies.” U.S. imports of auto parts (including tires) increased more than 600 percent between 2001 and 2011, and are on track to reach $14.5 billion in 2012. The rapid growth of subsidized and unfairly traded auto parts from China puts at risk every job both directly and indirectly supported by the U.S. auto–parts industry. The U.S. auto parts industry directly and indirectly supported 1.6 million jobs in 2009, with jobs at risk in every state.
Adding insult to injury, China continues to manipulate its currency. This magnifies the benefits of subsidies and other unfair trade policies that benefit China’s auto-parts exports. Currency manipulation artificially reduces the costs of China’s exports and inflates the costs of exports from the United States (and other countries) in China and all other countries where they compete with China. I estimated last year that a 25-to-30 percent appreciation of China’s yuan and other manipulated Asian currencies would support the creation of up to 2.25 million U.S. jobs, stimulating up to $286 billion in GDP growth (1.9 percent) and reducing federal budget deficits by up to $71 billion per year.
I applaud the Obama administration for its WTO complaint against China’s unfair tariffs on U.S. auto exports to China. However, WTO complaints can take years to resolve. Meanwhile, more jobs are at risk in U.S. auto parts industries. The U.S. Trade Representative should self-initiate U.S. trade complaints against China’s illegal subsidies, and other policies that unfairly promote auto-parts exports to the United States and limit our exports to their market. Many more jobs are at risk due to rapidly growing imports of unfairly traded auto parts from China than are threatened by the Chinese tariffs. Furthermore, officials at the U.S. Department of Commerce and the U.S. International Trade Commission can provide relief from unfair trade to beleaguered U.S. auto-parts makers and their employees in a matter of months, not years. It is time for the president to take a stand against China’s illegal and unfair export subsidies, and its currency manipulation. Many more jobs are at risk due to unfair import competition from China than from China’s illegal tariffs on U.S. exports.
1. The U.S. auto industry received $80 billion of bailout and restructuring funds in 2008 and 2009. As of Sept. 30, 2011, more than $40 billion had been repaid, and “Treasury expected the auto investments to cost the taxpayer just under $24 billion” (The Department of the Treasury, 2011. “Office of Financial Stability—Troubled Asset Relief Program: Citizen’s Report,” Fiscal Year 2011, 11). The Chinese government imposed antidumping duties of 2.0 percent to 21.5 percent on U.S. produced cars and sport utility vehicles with an engine capacity 2.5 liters or larger, and countervailing duties of 6.2 percent to 12.9 percent on those same vehicles. “The United States believes that China initiated the investigations without sufficient evidence, failed to objectively examine the evidence, and made unsupported findings of injury to China’s domestic industry.” It also accuses China of procedural errors in the enforcement of its fair trade laws (Office of the U.S. Trade Representative. “Obama Administration Challenges China’s Unfair Iposition of Duties on American-Made Automobiles.” July 5, 2012).