The United States has filed the latest in a series of trade actions against China at the WTO, this one objecting to unfair dumping of subsidized Chinese auto parts. But the relatively limited scope of the action, along with the political context, suggests this is about more than just unfair trade practices.
The case brought by the United States on Monday is the latest sign of a greater willingness by Western governments to confront China. The American action on trade comes just 11 days after the European Union agreed to start the world’s largest anti-dumping action ever, against imports of solar panels from China [...]
In its W.T.O. filing, the United States accuses China of providing at least $1 billion worth of subsidies from 2009 to 2011 for worldwide exports of cars and auto parts.
While $1 billion may sound like a large number, Chinese exports of automobiles and auto parts totaled $56 billion during this period, according to Chinese customs data. So even if China were forced by the W.T.O. to reverse the subsidies, the effect on Chinese exporters’ total costs might not be significant.
What we have here is a nice example of what people mean by the incumbency advantage. Over the weekend, Mitt Romney started running a series of ads attacking the President for weakness on China trade. This is part of Romney’s new revved-up detailed economic plan, which is not all that detailed. But China is one of the major planks. A candidate reacting to this can only make promises that, when in office, he or she will “get tough” on China. A President can merely designate his Administration to actually do it.
As alluded to previously, whether this “gets tough” on China or not is a bit debatable. It covers a small section of the Chinese auto parts market, and it exists on a continuum of other actions. Rich Trumka of the AFL-CIO, an organization that has endorsed Obama, certainly appreciates the support for American manufacturing jobs. But in an off-the-campaign trail moment, he would probably say that this is a relatively negligible action in a large auto parts market. Auto component imports from China have increased at a time coincident with employment drops in the US. However, that has more to do with plant closings for auto production than anything else.
None of this means that the US shouldn’t take actions against unfair trade practices, which this appears to fall under. But a true effort to support domestic industry and ensure fair trade would not coincide with something like the secret negotiations over the Trans-Pacific Partnership, which if as advertised would be far more damaging than the dumping of $1 billion in subsidized Chinese auto parts. Even in his statement, Trumka writes, “Make no mistake: much more needs to be done to reform our trading system and enforce our trade laws vigorously and consistently.”
But this allows people like Obama campaign spokesman Ben LaBolt to go on television and talk about all the trade enforcement that the Administration has taken against China (there are nine) and to contrast that with Mitt Romney’s outsourcing agenda while at Bain Capital, including a recent revelation of Romney talking about poor work conditions in China at a company Bain invested in called Global Tech. It all ties together very nicely. That’s what incumbents can do. And it’s one reason why incumbents win a lot of elections.
It’s also not an accident that the trade enforcement came against the auto parts industry, which is very abundant in the key battleground state of Ohio. Where the President is just coincidentally speaking today.
Photo by Mouser Nerdbot under Creative Commons license