Holding China Accountable
It’s the 15th U.S complaint lodged against China since that country joined the WTO in 2001.
According to the Alliance for American Manufacturing, imports of Chinese auto parts have grown by 25 percent in each of the past two years. The U.S. trade deficit in auto parts with China has increased by a staggering 900 percent over the past 10 years. At the same time, no other major auto-producing nation—Germany, Japan or South Korea—has such a trade imbalance. In fact, those nations export more to China than they import.
The Alliance blames much of that growth on state support of the Chinese auto industry. The organization claims that China has already pumped $27 billion in subsidies into its auto parts sector and plans to provide an additional $10 billion in the coming years.
China has also impeded U.S. exports of auto parts and finished vehicles. In July, the Obama administration filed another WTO complaint—accusing China of imposing unfair levies on $3.3 billion of U.S. vehicle exports, mostly by General Motors and Chrysler.
With a level playing field, U.S. manufacturers have shown they can compete. In December 2010, the WTO approved the administration’s decision in September 2009 to levy steep tariffs on Chinese tires. According to the U.S. International Trade Commission (ITC), between 2004 and 2008, Chinese tire shipments to the United States tripled by volume (from 14.6 million tires to 46 million tires) and quadrupled by value (from $453 million to $1.8 billion). Simultaneously, domestic production declined from 218.4 million tires to 160.3 million tires, and some 8,100 jobs were lost.
The ITC agreed that there had been such a rapid increase in imports that it caused market disruption for domestic producers. President Obama subsequently imposed three years of relief, applying tariffs of 35 percent in 2009, 30 percent in 2010, and 25 percent in 2011.
With the tariffs in place, domestic production increased significantly. Looking at the first six months after imposition of relief (October 2009 to March 2010) vs. the same six months in 2008-09, domestic production increased 15 percent. Hundreds of tire industry jobs have since been restored.
Election-year politics and the slow pace of the economic recovery have no doubt fueled anti-China sentiment lately. We don’t envy the job of any administration in trying to negotiate “fair” deals with China. That country is, after all, our second-largest trading partner, and we’ll need China’s help to address other thorny issues, such as nuclear weapons in Iran and North Korea.
We applaud the administration for its efforts with China so far, but much more can, and should, be done.