President Barack Obama says China isn’t playing fair when it comes to the global trading of cars.
The president has accused the communist country of illegally subsidizing the exports of cars and car parts, thereby forcing American manufacturers to shift production overseas to compete.
“The key principle at stake is that China must play by the rules of the global trading system,” said a White House official was quoted as saying in the BBC.
Obama’s charge comes in advance of his Monday visit to Ohio, a key battleground state that figures to be pivotal to his re-election fight against Republican rival Mitt Romney. The president is expected to discuss the World Trade Organization action against China today when he visits the state that lists more than 50,000 workers employed in the car industry.
In excerpts of a speech released by the Obama campaign, the president is expected to say: “Today, my administration is launching new action against China – this one against illegal subsidies that encourage companies to ship auto parts manufacturing jobs overseas.
Almost immediately after President Obama’s plans were revealed, China requested formal negotiations with the U.S. over extra duties imposed on Chinese tire imports.
The U.S. passed tariffs on cheap Chinese imports in March, backdating them to 2006. The Chinese are now challenging that decision through the WTO.
Under WTO rules, China’s filing of its complaint has set the clock ticking on a 60-day period during which the United States can try to settle the dispute in bilateral talks. After that, China could ask the WTO to adjudicate.
Both sides figure to take cautious steps to avoid a trade war that could further damage their economies.
“Through consultation within the WTO trade dispute settlement mechanism, the Chinese side hopes the U.S. can correct its wrongdoing and properly deal with concerns from China,” said Shen Danyang, a spokesman for China’s Ministry of Commerce (MoC).
In the latest wrangle, the Obama administration claims that China’s “illegal subsidies” in the car sector totaled $1billion between 2009-11.
Obama believes that the subsidies encourage America to outsource cars and car parts production to China, with these products then exported into the U.S. or other nations.
“Export subsidies are prohibited under WTO rules because they are unfair and severely distort international trade,” said U.S. trade representative Ron Kirk in a statement.
China pledged to wipe out export subsidies when it joined the WTO in 2001.
The decision by the Obama administration comes on the heels of Romney’s accusation last week that the president was being too soft on China.
The administration has already filed two other WTO complaints against China this year. The first accused Beijing of restricting exports of so-called rare earth metals that are used to make high-tech devices.
The U.S. has argued this has distorted the world economy by making it more expensive to make such goods outside China.
The second case accused Beijing of imposing anti-dumping duties on American cars exported to China, making them more expensive to buy, in a bid to protect local manufacturers.
Anti-dumping duties are used if a country thinks an item is priced lower than it costs to produce.