Trade Case May Produce Few Results

President Obama’s trade case against China on cars and auto parts will have little immediate impact on jobs and companies in the United States, but it is one of the few legal options available to the United States as China’s auto industry faces overcapacity problems and looks overseas to increase sales. In filing the case on Monday with World Trade Organization, Mr. Obama is making a political gesture to Midwestern states coping with the pressure that Chinese exports are placing on the American auto industry. But actual effects are likely to be delayed and limited. World Trade Organization cases typically take a year and a half to resolve. And unlike antidumping and antisubsidy cases, which can result in steep tariffs on imports that stay in place for “lasting” years, the trade organization cases often end with the losing country simply abandoning the offending policy. There can be a requirement that companies repay previous subsidies, but that is often difficult to enforce and can require further years of legal wrangling. The subsidies at issue are also small relative to scale of Chinese exports, which may mean China’s low wages, high investment rate and other advantages may have played a bigger role in spectacular expansion of Chinese auto exports than government subsidies. American trade officials respond that while China may have many strengths underlying its export prowess, they are doing what they can to address those policies that may violate international trade rules, particularly China’s emerging policy of setting up so-called export bases in which automakers receive incentives to make cars and car parts for overseas markets. “Obama administration will use every available avenue to stand up for American workers and businesses in the global trading system, and in taking this case to W.T.O. against China we’re doing so in a way that tackles China’s entire export bases program in this sector,” said Carol Guthrie, the spokeswoman for the Office of United States Trade Representative. She added, “This administration has a consistent record of supporting American jobs through wins at W.T.O., smart use of all our enforcement options and dialogue that gets results for American workers as well.” The Chinese export bases policies are so numerous, and affect so many different kinds of products, that it would take dozens of separate antisubsidy cases to tackle all of them. That would require a far lengthier legal effort than a single trade organization case, which United States has started by essentially filing a list of the names of offending policies to China. Under the process, the United States essentially demands Chinese officials start discussing how, if at all, the many policies are consistent with China’s commitment as a World Trade Organization member not to subsidize exports. Another advantage of such cases is that they require the United States only to prove that the Chinese policies violate organization rules. Antisubsidy cases at Commerce Department also require proof that a domestic industry has suffered financial injury as a direct result of the foreign subsidies. That tends to be harder to prove when the industry’s health is improving, and auto sales are rising this year as Americans replace aging cars (…..)

Link: http://www.nytimes.com/2012/09/18/business/global/us-files-wto-case-against-china-over-cars.html

Acerca de ignaciocovelo
Consultor Internacional

One Response to Trade Case May Produce Few Results

  1. (NYT GOLDEN PICK) Professor Uziel Nogueira says: The creation of a WTO panel to discuss China’s auto part policy is just political rhetoric during an election year. No danger of a trade war with China. In fact, THE most important trade issue between US-China was wisely dropped by the Obama administration. That is, to charge the Asian superpower as ‘currency manipulator’ and impose trade sanctions on the principal buyer of US public debt. So far, China has avoided the same fate of Japan in the late 80s. At that time, the Reagan administration coerced Japan to revalue its currency in order to reduce the bilateral trade imbalance, particularly in the area of autos. Tokyo’s political elite bowed to Washington. That HUGE exchange rate mistake led to a real state bubble that caused a banking crisis and economic stagnation that still persist today. Japan has lost its way in the 21st century.


    The highly efficient Chinese leadership has learned the lessons from Japan’s failure in dealing with Washington. Difficult US-China trade issues –such as the auto industry – will be discussed by lawyers at the WTO and not the corridors of the US Congress or at White House.

    http://www.nytimes.com/2012/09/18/business/global/us-files-wto-case-against-china-over-cars.html

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