More Unintended Consequences of Obama’s Auto Bailouts
The United States government has taken China to the World Trade Organization. They’re complaining about auto import tariffs China has imposed for a couple of years.
The United States launched a trade complaint Thursday against China at the World Trade Organization, accusing Beijing of unfairly imposing duties on more than $3 billion in exports of American-produced automobiles. The announcement came as President Barack Obama hit the campaign trail in the battleground state of Ohio, where automakers have been affected by the tariffs imposed in December. It underscored how America’s trade relations with rising economic power China could color the political debate ahead of the November presidential election. Under WTO rules, countries are allowed to impose punitive tariffs to offset damage from both subsidies and dumping — selling products at below market value — but the U.S. contends that in this and other cases, China has used those remedy measures in an unfair and retaliatory way to hurt American exporters.
Obviously this complaint being made public, while Obama is in a campaign trip throughout the Rust Belt, is pure coincidence I’m sure. Which auto manufacturers are the most harmed by these tariffs:
White House spokesman Jay Carney told reporters Thursday that the Chinese duties cover more than 80 percent of U.S. auto exports to China and fall disproportionately on General Motors, or GM, and Chrysler because of the actions Obama took to support the auto industry during the financial crisis. Some critics have contended that the administration’s bailout of the auto sector — which has seen it return to profitability even as the wider economic recovery has stuttered — could leave U.S. products vulnerable to countervailing duties by international competitors claiming it amounted to an unfair subsidy. China’s anti-dumping and countervailing duties, imposed on autos for two years and ranging from 2 percent to 21.5 percent, affect cars and SUVs with engine capacity of 2.5 liters or larger. A senior U.S. trade official, briefing reporters on condition of anonymity, said that in 2011, an estimated 92,000 of such autos were exported to China.
So the most impacted manufacturers are, of course, the bailed out Government, I mean General, Motors and Chrysler. This is the Obama administration once again paying back and paying forward its allies in the labor unions. However, it has become clear the bailing out of the auto industry has had some unintended consequences. The latest consequence appears to be the unnecessary souring of economic relations with the world’s largest consumer market, China. Any economics and/or international relations 101 student could’ve told you that the Chinese, among others, were not going to sit back and allow the US government to subsidize auto manufacturers that compete against their domestic manufacturers without retaliatory tariffs.
What President Obama, along with his clone Mitt Romney, need to do is stop their Donald Trump impersonations and learn to deal with China in a rational manner. To be truly competitive against the rest of the world, the US needs to get its national debt and budget deficit under control, enact real tax reform with lower rates, and deregulate. Finally, it needs to stop subsidizing preferred industries such as the automakers.