China has long been problematic to U.S. auto manufacturers for violating rules of trade in its automotive sector by subsidizing auto parts and blocking U.S. exports, which has harmed the nation's auto workers and businesses.
Consider: More than 400,000 jobs in the U.S. auto supply chain have been lost since 2000, and another 1.6 million U.S. jobs are at risk, unless China’s illegal trading practices are curtailed, according to three separate reports released by the Alliance for American Manufacturing (AAM).
Last week AAM struck gold for its auto sector, however, when the World Trade Organization (WTO) announced a favorable ruling for the U.S. regarding illegal tariffs imposed by China on exports of U.S.-produced cars and SUVs.
“Today’s ruling is further proof that China has repeatedly violated the rules of world trade,” said AAM President Scott Paul on May 23. “Not content to simply manipulate its currency and massively subsidize exports, Beijing has also acted to protect its market with illegal tariffs on U.S. products.”
What were the charges? It started on July 5, 2012, when the United States requested consultations with China which dealt with imposing anti-dumping and countervailing duties on certain automobiles from the United States. On Sept. 17, 2012, the United States requested the establishment of a panel, which convened on Oct. 23 of that year. Nearly two years later, the panel found, on May 23, that “China acted inconsistently with the general obligation set forth in Article 1 of the Anti-Dumping Agreement and Article 10 of the Subsidies and Countervailing Measures (SCM) Agreement to conduct investigations consistently with the provisions of these Agreements.” The panel thus recommended that China be asked “to bring its relevant measures into conformity with its obligations under the Anti-Dumping and SCM Agreements.”
“We commend the administration for pressing this case at the WTO and urge them to move forward on other vital trade actions, including practices that target the U.S. auto and auto parts sectors, Paul said. “America’s automotive industry and its manufacturing supplier base are key components of the nation’s economy and deserve Washington’s full support.”
This is the latest in a series of anti-dumping strikes against China, whose violations over the last two decades have affected everything from steel to shoes. AAM President Paul has been vociferous in his push to get action, both on national and global levels. Maintaining that “the real auto employment, where 75 percent of the jobs exist, is in the auto parts sector,” Paul says that these factories produce aluminum wheels, brake pads “and the thousands of other parts that go into marking an automobile.”
“We’ve seen imports of Chinese auto parts surge by 25 percent in each of the past two years,” he said. “We’ve seen our trade deficit in auto parts with China grow nearly 900 percent in just 10 years. Yet no other major auto-producing nation – Germany, Japan, or South Korea – has such a trade imbalance, in fact, those nations export more to China than they import.”
The problems have hit home in a variety of ways – just look at the numbers: More than 400,000 jobs in the U.S. auto supply chain have been lost since 2000 and another 1.6 million have been at risk against China’s illegal trading practices, according to three separate reports released by AAM in January of 2012. Since 2001, AAM has found that $62 billion worth of Chinese auto parts have been imported into the U.S., causing an auto parts trade deficit between the U.S. and China to increase by a staggering 850 percent.
Such egregious acts of trade are why anti-dumping laws were created, to provide protection to domestic firms from import competitors engaged in predatory pricing. The Antidumping Act of 1916 was designed to stop the practice of pricing imports “at a price substantially less than the actual market value or wholesale price of such articles in the principal markets of the country of their production.” Such actions are done with the intent of destroying, injuring, or preventing the establishment of an industry in the United States.
In essence, the law was supposed to stop importers from intentionally selling a product at a loss in order to drive competitors out of business, thereby establishing increased market power that allows one to raise prices above competitive market levels and increase profits.
The three reports released by AAM, said Paul, have proven “beyond a shadow of a doubt that China’s blatant use of illegal government subsidies and a web of predatory trade practices on a massive scale are undercutting companies in the U.S. auto supply chain.”
“It’s essential that federal action be taken to challenge these abuses before they completely undermine the job recovery underway in the U.S. auto industry,” Paul said.