China and the US Playing Hardball or Softball Through the WTO?

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When I received my daily press alert for goings-on within the World Trade Organization (WTO), I almost chuckled.

Turns out that both the US and China — apparently coincidentally — levied cases against each other before the WTO at virtually the same time.

In the first, the US accused China of unfairly subsidizing its automobile exports, to the tune of $1 billion — that’s right, billion — between 2009 and 2011, according to Keith Bradsher’s article in the New York Times.

In the second, China took the “kitchen sink” approach, turned around and accused the US of unfair countervailing and anti-dumping duties placed on various goods such as “paper, steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers,” according to a WTO press release.

The FT reminds us that the Obama administration has filed two other cases against China this year, one on rare earths and another on China’s imposition of countervailing and anti-dumping duties on car exports.

Does this sound like a weird, global-trade see-saw? Well, it is. Here’s what’s interesting this time around, however.

China may still not stand to lose much from any subsequent action. Bradsher reported that the $1 billion in subsidies is relative to “Chinese exports of automobiles and auto parts total[ing] $56 billion during this period, according to Chinese customs data. So even if China were forced by the W.T.O. to reverse the subsidies, the effect on Chinese exporters’ total costs might not be significant.”

That may be true, but it’s not as though China’s not-so-above-board play hasn’t cost the US manufacturing industry a bit of hardship.

Take China’s state-owned enterprises, for example. Tim Brightbill, attorney at Wiley Rein LLP, has told MetalMiner, “The SOEs come [to the US], set up a steel mill, produce here, and have to compete here. The difference is they get preferential capital and other government subsidies to set up steel mills.” Even if they don’t get subsidized initially, Brightbill said, they may receive preferential treatment for their operations two years down the road.

The US auto parts industry, perhaps even more than the US automakers, has clearly suffered over the past decade. According to the Times, quoting data provided by the Office of the United States Trade Representative, “auto parts employment in the United States has dropped by about one-half from 2001 to 2010, as imports from China grew nearly sevenfold over the same period.”

“Auto parts manufacturers directly employ 54,200 people in Ohio, and when suppliers like steelmakers are included, the auto industry accounts for 850,000 jobs in the state, or 12.4 percent of total employment there,” the article continued. (We’ll get back to the significance of Ohio in a bit.)

Although the extent to which jobs have evaporated or factories have closed directly due to surging Chinese imports is debatable, a new discovery has brought some other worrying news to light.

Continued in Part Two.

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