U.S., China file dueling complaints as trade tensions heat up

By Jim Puzzanghera and Michael A. Memoli, Los Angeles Times

Sept. 18, 2012 12 AM PT

WASHINGTON — The United States and China have filed international trade complaints against each other, escalating trade tensions amid a weakening global economy and a heated U.S. presidential race.

The Obama administration launched a new enforcement action Monday with the World Trade Organization, alleging that China was illegally subsidizing exports of automobiles and auto parts.

Beijing filed its own WTO complaint earlier Monday, challenging anti-dumping duties that Washington had levied on $7.2 billion in goods from China — including steel, tires and kitchen appliances — that the U.S. said were sold here below cost.

The moves came as President Obama and Republican challenger Mitt Romney sparred over who would be tougher on China, whose swift economic rise has fueled anxiety in the U.S. Critics have alleged that China engages in unfair trade tactics that have led to chronic U.S. trade deficits and the loss of millions of American jobs.

Both candidates are trying to lure blue-collar voters in key battleground states such as Ohio, Pennsylvania and Wisconsin, where manufacturing jobs in recent years have gone to Chinese factories propped up by government subsidies, export incentives and an artificially low currency.

“Trade has to work for America. That means crack down on cheaters like China,” Romney said in a new TV ad that began airing Monday.

Obama in turn accused Romney of making money by investing in companies that moved their operations to China when the Republican was head of private equity firm Bain Capital.

“He’s been running around Ohio claiming he’s going to roll up his sleeves and he’s going to take the fight to China,” Obama said during a campaign stop in Cincinnati on Monday. “Now, you can’t stand up to China when all you’ve done is sent them our jobs. You can talk a good game, but I like to walk the walk, not just talk the talk.”

To cheers from the crowd, Obama said his administration had filed more trade complaints against China in less than one term than the George W. Bush administration had in two. The latest U.S. complaint was the ninth trade action filed against China by the Obama administration.

The tit-for-tat trade complaints were leveled as Defense Secretary Leon E. Panetta arrived in Beijing counseling calm in a dispute between China and Japan over several uninhabited islands. That standoff spawned anti-Japan rallies in dozens of Chinese cities.

But it’s difficult to try to tamp down that dispute, which is connected to the sensitive issue of Taiwan, when the U.S. is filing trade complaints and its presidential candidates are criticizing China, said Phillip Lipscy, a specialist on the politics and economies of East Asia.

“Certainly when conditions are bad, people try to look for someone to blame,” said Lipscy, an assistant political science professor at Stanford University. “But I really don’t think China in any way lies at the heart of the current problems in the United States.”

The China-bashing between the two campaigns drew a rebuke from the fiscally conservative Club for Growth, saying it could ignite a trade war that would damage the U.S. economy.

“Instead of pandering on trade with China, both presidential candidates ought to tout the benefits that come with free trade,” said Chris Chocola, the group’s president.

Despite the chronically large trade deficit with China, the Asian superpower plays an important role in the U.S. economy, Lipscy said. For example, a recent Wall Street estimate said sales of Apple Inc.’s new iPhone 5, which is manufactured in China, could add 0.25% to 0.5% to annualized U.S. economic growth in the last three months of the year.

China is the third-largest market for U.S. goods, and the $104 billion in exports shipped there last year was up 13% from the previous year.

“It’s a mutually beneficial relationship,” Lipscy said.

But the U.S. and other countries are concerned that there is still too much government intervention and state ownership in the Chinese economy, he said. Last spring, the Obama administration imposed stiff tariffs on imported solar panels from China after determining that they were being dumped on the U.S. market below fair market cost.

In its new complaint, the U.S. accused China of providing improper tax incentives and other export subsidies to its auto industry. The U.S. said Chinese exports of autos and auto parts soared to $69.1 billion last year from about $7.4 billion in 2002, taking China’s share of that market to fifth worldwide from 16th.

The U.S. requested WTO-led consultations with China to resolve the dispute. If there is no resolution after 60 days, the U.S. could ask that the dispute be adjudicated by a WTO panel. The Obama administration has won three such trade cases against China since 2009.

In a statement, Romney said the administration’s actions were “too little, too late” and an election-year effort to distract voters. White House spokesman Josh Earnest countered that the complaint was “months in the making.”

The arguments about China’s trade practices resonate more in Ohio, with its large auto industry presence, than in California, which is a gateway for many products arriving from and being sent to Asia.

The rescue of General Motors and Chrysler, started under the Bush administration and expanded by Obama, has figured prominently in the White House strategy in Ohio. Romney opposed the auto industry rescues. An NBC News/Wall Street Journal poll released last week showed Obama leading Romney 50% to 43% in Ohio.

China’s complaint Monday alleged that anti-dumping measures put in place by the U.S. for a variety of products violated WTO rules. China also requested consultations led by the international trade body.

The complaint stems from new powers granted to U.S. officials by Congress to impose anti-dumping duties on Chinese goods believed to be exports to the U.S. at a subsidized cost.

A spokeswoman for the U.S. trade representative’s office said the administration was confident that the anti-dumping measures were “fully consistent with our international obligations, and we will fight the claims aggressively.”

One of the biggest trade complaints against China is that it has kept its currency artificially low to boost its exports.

The Obama administration has resisted calls to formally declare China a currency manipulator because that would open the door to economic sanctions. Administration officials have urged China to let market forces dictate the currency’s value, and China has allowed its currency to rise somewhat.

Romney said there hasn’t been enough progress and has promised to declare China a currency manipulator on the first day of his presidency if he’s elected.

Last week, the official New China news agency called Romney’s comments “as false as they are foolish.” In an editorial, the news agency warned that if Romney’s “mud-slinging tactics were to become U.S. government policies” a trade war was likely, which would be catastrophic to both countries and the “already groaning global economy.”

The prospect of a trade war is the reason that some experts believe Romney wouldn’t take that step.

“There is a pattern of candidates being aggressive toward China during the campaign and then coming to a form of de facto accommodation once they’re faced with actually dealing with them,” said I.M. “Mac” Destler, a specialist on trade policy at the University of Maryland.

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Puzzanghera reported from Washington, Memoli from Cincinnati.