China’s WTO Violations Threaten 1.6 Million U.S. Jobs

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China’s violations of World Trade Organization rules have cost the U.S. more than 400,000 jobs since 2000 and are now threatening about 1.6 million American jobs in the auto industry, according to the Alliance for American Manufacturing.

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Beijing is accused of unfairly subsidizing Chinese auto-parts makers while illegally restricting the exports of crucial raw materials that foreign parts makers need to stay competitive. The group says a 900 percent increase in auto parts imports from China over the last decade — a total of $64 billion in parts since 2001 — had widened the auto-parts deficit with China by 850 percent, and is to blame for thousands of lost industry jobs.

“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,” said Scott Paul, executive director for the Alliance.

Over the next two decades, China will invest $1.5 trillion in “new energy” vehicles and parts. China’s manufacturers are targeting batteries, electric motors, electronic cooling systems, and fuel cells.

The alliance is challenging China’s policies, calling on the federal government to take action against the Chinese before Vice President Xi Jinping arrived in Washington to meet with President Barack Obama on February 14. Xi is expected to become China’s next leader. The two are set to discuss bilateral and regional issues.

Obama is no stranger to trade complaints against China, and has issued many himself. Obama has imposed duties on tires made in China, and in so doing is said to have created 1,000 U.S. jobs.

The U.S. Senate has voted to punish China for maintaining and undervalued currency, which has given it a competitive advantage in the global marketplace, while Republican presidential candidates have pledged to label China a currency manipulator.

Midwest states, including some of the hardest-hit by the recession and the auto industry’s collapse, are most at risk of losing auto-parts jobs to China’s imports. Michigan stands to lose 250,000 jobs, while the Alliance says Ohio could lose 189,000.

“The Chinese have cheated,” said Senator Sherrod Brown (D-Ohio) who is leading the trade effort in Congress along with Senator Debbie Stabenow (D-Mich.).

But Chinese officials deny having violated any international trade agreements. “Over the past 10 years, China has fully implemented its WTO commitments, and its trade and investment liberalization and facilitation have been significantly increased,” President Hu Jintao said last month.

While denying any wrongdoing, Chinese officials hope to reduce trade tensions before Xi’s visit to the U.S. by sending business delegations on buying trips to the U.S., according to people familiar with the plans who spoke on condition of anonymity.

Similar delegations have in the past focused on bundling planned purchases of Boeing jets, American grain, and other exports into multi-billion dollar contracts that can be signed at elaborate ceremonies in front of press.

Such moves are unlikely to appease Americans after China last month imposed tariffs on American vehicles. In December, Beijing announced its decision to impose punitive duties of up to 22 percent on large cars and sport utility vehicles from the U.S.

The Alliance — which includes the United Steel Workers union, the United Auto Workers union, the Economic Policy Institute, and the trade law firm Stewart and Stewart, as well as the Wessel Group, a trade strategy firm — will urge the Obama administration to file trade cases at the Commerce Department and the WTO to challenge everything from reported Chinese subsidies for auto parts exporters to China’s export restrictions on rare earth metals needed for many auto parts.

Legal briefs prepared by the group call for the WTO to challenge Chinese rules pressuring American automakers to transfer their latest electric car technology to China if they want their cars to qualify for green-energy subsidies when sold there.

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To contact the reporter on this story: Emily Knapp at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com

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