Trade Case May Produce Few Results - New York Times

BEIJING â€" The United States on Monday filed a broad trade case against  China at the World Trade Organization, alleging unfair subsidies for exports of  cars and auto parts.

The case comes at a critical  time in the U.S. presidential campaign, as auto manufacturing states in the upper Midwest like Michigan, Wisconsin and particularly Ohio have turned into crucial battlegrounds. But the case may not make any difference in  terms of jobs for many months, as W.T.O. cases typically take a year and a half before a final decision is reached, and sometimes longer.

Hours after news of the American move began to circulate, but before the trade case was actually filed in Beijing, China’s commerce ministry announced in a statement on its Web site that it was filing its own W.T.O. case against the United States, alleging unfairness in how the United States calculates the penalty tariffs in anti-subsidy cases.

The Chinese action appeared to be coincidental, as the Chinese government seldom responds quickly to trade actions â€" indeed, the Chinese commerce ministry statement made no mention of the American action. The ministry had no response all day to questions relayed by phone and fax in the morning about the American action.

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.

Mr. Obama planned to talk about the  move Monday during a visit to Ohio, a place where  the president is trying to capitalize on  his bailout of the auto industry in 2009. A  poll by NBC News, The Wall Street  Journal and Marist College last week  showed Mr. Obama building a significant lead over the Republican challenger, Mitt Romney, in Ohio.

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 exports of cars and auto parts.

  While China exports virtually no fully  assembled cars to the United States, it  has rapidly expanded exports to developing countries, and those exports compete to some extent with cars exported  from or designed in the United States.

Ohio has suffered heavily from job  losses that have coincided with surging  imports of auto parts from China. Auto  parts employment in the United States  has dropped by about one-half from 2001  to 2010, as imports from China grew  nearly sevenfold over the same period, according to data provided by the senior  administration official. Auto parts manufacturers directly employ 54,200 people  in Ohio, and when suppliers like steel  makers are included, the auto industry  accounts for 850,000 jobs in the state, or  12.4 percent of total employment there.

But auto industry experts debate the  extent to which those imports have  been directly responsible for the closing  of factories and for cutbacks at other  plants, as ever-increasing automation  has also played some role. The slowing  of the U.S. car market since 2008 has had  an effect as well, although sales have begun to recover in recent months.

Mr. Romney, the Republican presidential nominee, has repeatedly accused the Obama administration of not  doing enough to challenge China on  trade and currency policies. But the timing of the administration case, so soon  before the elections, makes it likely that  the Chinese government will accuse Mr.  Obama of playing politics â€" an accusation already made by Chinese officials, particularly those with close ties to affected industries, over recent trade  cases involving solar panels.

Chinese officials strongly criticized  Mr. Obama last winter for not blocking  solar panel trade cases against China, accusing him of playing politics with trade. But as Mr. Romney has called  for a more confrontational trade policy  toward China, the state media have become highly critical in recent weeks of Mr. Romney as well.

“It is rather ironic that a considerable  portion of this China-battering politician’s wealth was actually obtained by  doing business with Chinese companies  before he entered politics,” Xinhua, the  state-run news agency, said in a commentary Friday.

The Romney campaign has said that  Bain Capital, the private equity firm of  which Mr. Romney was a founder, mainly helped build companies in the  United States, not China.

Asked whether the trade cases  against China were timed for political  effect, a senior administration official  said by e-mail that. “President Obama  has prioritized enforcement of Americans’ rights in the global trading system  from day one, and this administration  has a consistent record of action to support American jobs.”

The senior administration official was not authorized to comment on the politics of the issue and insisted on anonymity for this reason.

The Chinese case against the United States had long been expected by trade lawyers. The case cites a long-running legal battle waged by importers in the United States courts over whether the Commerce Department’s methodology in calculating anti-subsidy tariffs results in double-counting for nonmarket economies like China’s when imports from the same country are also subject to anti-dumping tariffs.

Congress passed legislation earlier this year to fix the alleged double-counting of anti-subsidy tariffs, also known as countervailing duties. But importers contend that the legislation should not be applied retroactively.

Carol Guthrie, a spokeswoman for the Office of the United States Trade Representative, said on Monday that the United States was reviewing the new Chinese case at the W.T.O. and would respond. The legislation earlier this year, and prior anti-subsidy rulings cited by China in its W.T.O. petition on Monday, all comply with W.T.O. rules, she wrote in an e-mail.

The global trading system has long been founded in part on the assumption  that companies will act to defend operations in their home countries, and will  file anti-dumping and anti-subsidy cases  against imports. But that logic has  eroded in recent years in the case of  China as practically every Western  multinational company â€" and a growing  number of smaller companies as well â€"   has moved factories and other operations to China and become reluctant to  risk retaliation by filing trade cases.

Unions have the legal standing to bring many kinds of trade cases in the United States. But with the exception of the United Steel Workers union, which filed a legal petition in 2010 for the administration to review imports of energy-efficient technology, unions have been leery of filing trade cases because of the six-figure and even seven-figure legal fees involved.

Only countries can file W.T.O. complaints.

Michael Wessel, the longtime trade adviser to the United Steel Workers, said that unions were eager for the government to file cases.

“The landscape has changed with multinational companies often having operations in both countries and reluctant to act for fear of Chinese retaliation or because they’re  profiting from China’s policies,” he said. “This may be the start of a major shift in the U.S. approach to trade enforcement that’s necessary.”

When the Obama administration took  office, it sought economic cooperation  with China on many issues and was initially cautious about bringing large  trade cases. The conspicuous exception  was a decision in September 2009 to impose tariffs on tires imported from  China, and even that decision was to  some extent forced by complex legal  deadlines in the United States.

But the administration has filed trade cases this year on rare earth metals and on autos and has started to take a stronger tone in general. In addition to accusing China on Monday of subsidizing exports of autos and auto parts to the United States, the Obama administration also took another legal step on Monday to push forward a recently filed W.T.O. case accusing China of unfairly putting anti-dumping tariffs on American car exports last winter.

The shift has come as China has begun to play a somewhat less important part in Treasury bond auctions, as Chinese trade surpluses erode and capital flight from China increases, although the Obama administration has avoided any linkage whatsoever of bond policies.

China remains the largest foreign holder of Treasuries, however.

Peter Baker contributed reporting from Washington.