Trade War Watch 22: Obama Wags The Dog, Drags China In Front Of WTO Again In Ohio - Again

Bertel Schmitt
by Bertel Schmitt

President Barack Obama will carry a familiar gift to election rallies in Ohio today.

“The Obama administration will announce a trade complaint against China today as President Barack Obama campaigns in Ohio, alleging impermissible subsidies of auto- and auto-parts exports that encourage outsourcing to China from the U.S.” an administration official told Bloomberg.

According to the report, the U.S. will accuse China of $1 billion in illegal subsidies between 2009-11.

This wag the dog trade war has a rich tradition. In July, the United States reported China to the WTO over extra duties on more than $3 billion worth of cars imported from the U.S. This also coincided with Obama campaigning in Ohio.

While UAW members will love to hear the new salvos in a trade war with China, car-makers will flinch. Their profitability, and large parts of the viability of U.S. production, hinge on the importation of cheap Chinese parts. It was Detroit that spearheaded outsourcing to China, often to factories owned by Detroit car companies. Especially the viability of GM depends on good relations with its largest market China .

The industry believes and hopes that this is mostly pre-election theater. Would the Obama administration be serious, it could easily slap a punitive tariff on Chinese parts instead of going the long and winded WTO route.

According to Liu Li-Gang, a Hong Kong-based economist at Australia & New Zealand Banking Group and former World Bank employee, the “rhetoric will likely be toned down following the polls, as the competitiveness of the U.S. auto industry will suffer should they impose sanctions on imports of relatively cheap Chinese parts.” Also, the Chinese will point out that the bailout of GM alone was more than 50 times bigger than their alleged illegal subsidies.

What is discouraging is how readily this nonsense is consumed. Raising tariffs would raise the price of U.S. made cars, hitting consumers in the wallet. To compete, cars would have to be made in Canada and Mexico, which don’t have these tariffs. More jobs would get lost. Eventually, production of Asian car parts would migrate to other low cost countries.

Today, China files a counter complaint abolut close to 30 products that have previously been targeted by U.S. duties. According to the WTO, the products include steel, tires, magnets, chemicals, kitchen appliances, wood flooring and wind towers.

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=""> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href=""> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • -Cole- -Cole- on Sep 18, 2012

    Obama is stupid. There is no way around it

  • DOF_Power DOF_Power on Sep 19, 2012

    Free trade is a doctrine based on the old white power/superiority racist/xenophobic belief. Now the that truth has been exposed that chinese can do more then silk, indians more then grow spice, brazilians more then grow coffee they top politicos don't know what to do.

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