In a complaint filed by the Obama administration against Chinese car parts manufacturers the administration alleges that the Chinese government is unfairly subsidizing parts production which is causing many manufacturers to move production overseas.
Skeptics tout the move as being politically motivated as the U.S. President is expected to discuss the World Trade Organization complaint at an upcoming campaign rally in Ohio where 50,000 U.S. citizens are employed in some way by the automotive industry.
Ohio, along with Michigan, is crucial to President’s Obama’s hopes for victory in the elections this November. Earlier in the year a bill was passed that gave the authority to levy heavy penalties on China and to backdate those penalties to 2006.
“Through consultation within the WTO trade dispute settlement mechanism, the Chinese side hopes the US can correct its wrongdoing and properly deal with concerns from China,” said Shen Danyang, speaking on behalf of China’s Ministry of Commerce.
The Obama Administration believes that the government provided subsidies in China encourage manufacturers to shift production to that country and are thus a violation of trade agreements because export subsidies are illegal under WTO rules. Part of its application for admission to the organization was China’s abandonment of such policies, a shift which was expected to finish last year.
These subsidies unfairly skew world manufacturing in China’s favor by making it noticeably more expensive to produce in other locations on the globe. The second part of the complaint deals with anti-dumping duties imposed by China on U.S. cars exported to China. Such duties are imposed when a country thinks that a trade partner is selling a certain product for less than it costs to manufacture in order to gain a competitive market advantage.