Trade War Watch 4: China Reports USA to the WTO

Bertel Schmitt
by Bertel Schmitt

The Chinese aren’t messing around with this one. On Friday, Obama slapped a 35 percent punitive tariff on Chinese tires. On Monday, a soon as the WTO was open for business, China filed a formal complaint against the United States of America with the World Trade Association in Geneva, China Daily reports.

Under the WTO’s dispute settlement system, the two countries will have 60 days to try to resolve the dispute peacefully, and to pedal back to where they came from. If peace breaks out, China will export its tires, America will sell its cars and chickens. If consultations fail, China can and will request a WTO panel to investigate and rule on the case. If a ruling is reached, both can appeal. The next ruling is final.

China has experience with the proceedings. The United States, the European Union and Canada had taken China to task over spare parts tariffs. China imposed a 25 percent tariff rate on auto parts in 2005, if they accounted for 60 percent or more of the finished product’s value. Normally, spare parts carry a 10 percent import duty. The WTO ruled against China, China appealed, the WTO rejected the appeal. Two weeks ago, China backed down. It was seen as a peaceful signal. It was misread as weakness.

The Chinese mission to WTO said in a statement that the tire ruling “runs counter to relevant WTO rules, it is a wrong practice abusing trade remedies.”

China hopes that “all sides will understand its determination to firmly fight against trade protectionism so as to commonly safeguard the multilateral trading system by respecting WTO rules.”

They won’t roll over. And it won’t blow over unless Obama and Hu Jintao have a beer in the White House Rose Garden, or smoke the peace pipe in Pittsburgh, or do whatever needs to be done to make this thing go away. If it doesn’t, the whole car subsidy thing will come on the table, something the USA and some European countries will try to avoid. Just like Belgium is dragging Germany in front of the EU in Brussels over Opel, a whole globe would like to see the big guys being barbecued for their big wallet bailouts. In a way, this gives Obama a chance to save face. He can tell his United Steel Worker buddies: “Boys, I’ve tried.” Or not.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Patapon Patapon on Sep 15, 2009

    BDB : September 14th, 2009 at 7:36 pm Whatever they pay their Chinese employees and dump to Chinese street have nothing to do with the US. Bull. Air and water pollution doesn’t care about national borders. When they pay their employees starvation wages, it means fewer jobs at good wages here in the USA. Why would a corporation keep their manufacturing in the first world where they have to abide by strict labor, environmental, and safety standards when they can make their stockholders happy by relocating to authoritarian cesspools that have no standards and starvation wages? ------------------------------------------ To whom does the air and water in China belong to? If the Chinese govt want to pollute their environment, it will harm their own people first. I highly doubt the Chinese govt would want that PR disaster. What you don't seem to understand is that your so-called "cesspools with no standards" and "starvation wages" are all relative. Do you think your average production worker would travel halfway across the country, enduring a 2-3 day trip, to work for wages that are below any other job available to them? The fact of the matter is that your standardless cesspool is a decent, and oftentimes better standard of living than many other rural areas. As for your "starvation wages" argument, it is true that they earn less, but everything there costs less as well. By my estimate, even at $1/hr, 3-hrs worth of work is enough to buy a decent meal for the entire day. Not luxurious by US standards, but by no means a "starvation wage" and better than your typical third-world Asian country. But herein lies the irony: Placing tariffs on Chinese goods will only bring the wages down closer to "starvation" level. TTAC pointed this out before in Trade Watch #1, but if the US puts restrictions on China, factories will only move operations to 3rd world countries with even lower wages. Short of blockading an entire hemisphere, these low-skill jobs are never coming back to the US.

  • Dilbert Dilbert on Sep 15, 2009

    "If they paid employees $1 an hour and/or dumped toxic waste into the streets to get “low prices”, they would be thrown in jail!" And if they paid employees $70 an hour and/or followed US environmental standards, they'd be bankrupt. They choose option A, but you can choose not to buy them.

  • VoGhost Fantastic work by Honda design. When I first saw the pictures, I thought "Is that a second gen Acura NSX?"
  • V16 2025 VW GLI...or 2025 Honda Civic SI? Same target audience, similar price points. Both are rays of sun in the gray world of SUV'S.
  • FreedMike Said this before and I'll say it again: I'm not that exercised about this whole "pay for a subscription" thing, as long as the deal's reasonable. And here's how you make it reasonable: offer it a monthly charge. Let's say that adaptive headlights are a $500 option on this vehicle, and the subscription is $15 a month, or $540 over a three year lease. So you try the feature for a month, and if you like it, you keep it; if you don't, then you discontinue it, like a Netflix subscription. In any case, you didn't get charged $500 up front the feature. That's not a bad deal.In my case, let's say VW offers an over the air chip reflash that gives me another 25 hp. The total price of the upgrade is $1,000 (which is what a reflash would cost you in the aftermarket). If they offered me a one time monthly subscription for $50 to try it out, I'd take it. In other words, maybe the news isn't all bad.
  • 2ACL A good car, but - at least in this configuration -not one that should command a premium. Its qualities just aren't as enduring as those of Honda's contemporary sports cars. For better or worse, this is a formula they remain able to replicate.
  • Jalop1991 I just read that Tesla's profits are WAY down "as the electric vehicle company has faced both more EV competition from established automakers and a slowing of overall EV sales growth." This Cadillac wouldn't help Tesla at all, but the slowing market of EV sales overall means this should be a halo/boutique car. Regardless, yes, they should make it.
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