Trade tensions rise as US takes on China over car subsidies

The US yesterday launched a new trade case against Chinese car and car-parts subsidies as President Barack Obama stumped for votes in Ohio, a car-manufacturing state that could be decisive in the November presidential election.

Beijing fired back with a complaint against US duties on many Chinese exports, in the latest sign of trade tension between the world’s two largest economies.

The new US case filed at the World Trade Organisation (WTO) targets what Washington said were “extensive subsidies” to Chinese car and car-parts producers in designated regions.

“Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the mid-west. It’s not right, it’s against the rules, and we will not let it stand,” Mr Obama said.

Republican presidential rival Mitt Romney has accused him of not being tough enough with Beijing on trade and currency concerns that threaten US jobs.

“Campaign-season trade cases may sound good on the stump, but it is too little, too late for American businesses and middle-class families,” Mr Romney said.

The decision to launch the case follows pleas from US steelworkers and other unions for action to stop what they say is a flood of unfairly subsidised Chinese car parts.

USTR said the targeted export bases made at least $1bn (€763m) in subsidies available to car and car-parts exporters in China during the years 2009 through 2011.

US trade officials said they are taking the next step in a separate case filed in June against Chinese duties on US car exports by asking the WTO to establish a panel to hear the US complaint.

That case was also announced when Mr Obama was on a campaign swing through Ohio.

China’s counter-complaint filed yesterday potentially affects close to 30 products that have previously been targeted by US duties, a trade official familiar with the case said.

The WTO said the products included steel, tyres, magnets, chemicals, kitchen appliances, wood flooring, and wind towers.

In March, congress voted to ensure the US could impose duties on subsidised goods from China and Vietnam, a move the White House said was needed to protect American jobs.

“China hopes that the United States can correct its mistaken policy and appropriately resolve China’s concerns through WTO dispute resolution mechanisms and consultations,” Chinese commerce ministry spokesman Shen Danyang said.

The WTO is unlikely to make a ruling on the two cases before the US election.

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