U.S. President Barack Obama filed a broad complaint against China with the World Trade Organization on Monday, accusing the world’s largest automobile producer of $1 billion in illegal subsidies for exports of cars and car parts.
“Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It’s not right; it’s against the rules; and we will not let it stand,” Obama said in Ohio, a critical battleground state in November’s presidential election and one of the nation’s largest automotive industry suppliers.
Obama’s challenger in the presidential election, Republican Mitt Romney, has repeatedly accused Obama of not being tough enough against China on trade.
Obama has accused Romney of shipping American jobs abroad during his tenure at Bain Capital, a multi-million-dollar private equity firm.
"You can't stand up to China when all you've done is send them our jobs," Obama said. "You can talk a good game. But I like to walk the walk, not just talk the talk.”
Romney responded in a statement, saying that Obama has waited too long to take action. “I will not wait until the last months of my presidency to stand up to China, or do so only when votes are at stake," he said.
While the trade case comes less than two months before the presidential election, it is nevertheless a sign of a greater willingness by Western governments to confront China, the New York Times reported.
According to Scott Paul, executive director of the Washington, DC-based American Alliance of Manufacturing (AAM), the case is the culmination of more than two years’ information that shows a dramatic spike in increased and cheaper Chinese auto imports.
“Between 2009 and 2011, we’ve seen a 25 percent surge in Chinese auto imports in the U.S.—and it’s not because they can make them any better than us,” Paul said. “These practices directly affect 1.5 million American workers who are employed in the automotive industry.”
Based on a study conducted by AAM, more than 400,000 jobs in the U.S. auto supply chain have been lost since 2000. The organization partly blames this loss on China’s persistent violation of WTO rules.
In 2009, the Obama administration extended emergency loans to U.S. automakers GM and Chrysler—a move that prevented the collapse of one of the biggest American industries. According to Paul, that bailout was not a violation of WTO rules and, in fact, offered tax credits to foreign-owned car companies to conduct business in the United States.
“The Chinese auto industry is receiving illegal benefits through tax rebates and targeted subsidies, which is a practice that is in direct violation of WTO rules that they’ve agreed to. This distorts the balance of trade throughout the world,” Paul said.
Despite the fact that it may take the WTO more than a year to reach a decision in the subsidies violation case, Paul said it still provides a warning to China.
“This puts them on notice that the international community is watching them. And I don’t think this will be the only case that comes out against them. I believe it’s just the tip of the iceberg.”