China Provides Illegal Automotive Subsidies, US Charges in WTO Complaint

U.S.-China trade tensions heated up Monday as the U.S. lodged a complaint over Beijing's automotive subsidies with the WTO and China countered with a filing over U.S. duties on Chinese products.

Washington accused China of providing at least $1 billion in illegal subsidies to Chinese auto and auto parts exporters over 2009-2011, helping them beat U.S. manufacturers in the huge U.S. market.

The U.S. Trade Representative said China's "export base" program, in which Beijing targets support for automotive manufacturers in designated regions to develop them as export centers, violated World Trade Organization rules.

The program has helped China increase auto and auto parts exports from $7.4 billion a year to $69.1 billion in the decade to 2011, the USTR said.

Washington asked the World Trade Organization to launch "consultations." the first step of the WTO process for resolving trade disputes.

China answered with its own new WTO complaint, saying Washington had unfairly applied anti-dumping and countervailing duties to two dozen Chinese products.

The cases were just the latest in the WTO complaints submitted by the world's two largest economies against each other.

Washington has now 10 cases against China at the Geneva-based WTO, most of them lodged in the past two years, part of an effort by President Barack Obama's administration to use trade rules to beat down Beijing's huge bilateral trade surplus with the U.S.

China on Pace to Surpass 2011

In the first seven months of this year, China sold $174 billion more in goods to the United States than it bought from the U.S. -- on pace to slightly surpass the 2011 full-year bilateral trade gap of $295 billion.

In February the Obama administration stepped up its campaign, establishing a special cross-agency unit, the Interagency Trade Enforcement Center, that was targeted at mainly Chinese exports to the United States.

But Monday's WTO move also came as Obama seeks to rebuff accusations by Republican presidential rival Mitt Romney that he is soft on China, an issue that could resonate in key Nov. 6 election states like Ohio which have a strong auto industry presence.

Speaking at a campaign event in Cincinnati, Ohio, on Monday, Obama said: "When other countries don't play by the rules, we've done something about it."

"We brought more trade cases against China in one term than the previous [Republican] administration did in two. And every case we've brought that's been decided, we won."

Alleged Subsidies Total $27.5 Billion

The newest U.S. complaint builds on reports submitted to the government by the steel and auto parts industries in January this year, which alleged China had provided its auto parts makers $27.5 billion in subsidies over the decade to 2010.

The USTR focused on only $1 billion of those subsidies, to support Chinese companies in strategic auto export centers that have taken direct aim at the $350 billion U.S. auto industry as it rebounds from a crippling recession.

'Facts are Indisputable'

"The facts in the case are indisputable. China is subsidizing its auto parts sector, blocking our exports, and causing significant harm to workers and businesses in our nation," said the Alliance for American Manufacturing, the steel and auto parts coalition.

"Our auto assembly sector, now back on its feet, could be undercut by China's cheating, causing irreparable damage to the heart of America's productive economy. Auto parts makers in America have already seen the effects of 25% surges in Chinese imports over each of the past two years."

China's complaint about U.S. duties was broader, following U.S. legislation in March that addressed WTO objections to the way the U.S. made calculations to apply anti-dumping and countervailing duties on imports.

After the legislation was passed, Washington renewed duty programs on a large number of China products, and China has followed with a complaint in May and then another on Monday.

The newest raised a challenge to U.S. duties on paper, steel, tires, magnets, chemicals, kitchen appliances, wood flooring and wind towers.