The United States government has challenged China in its violation of Free Trade Rules as the latter is subsidizing the exports of auto parts improperly.
With Western governments making efforts to deal with a high rate of unemployment by boosting exports of high-value industrial goods, it comes at a politically sensitive time when Obama has to keep campaign promises of doubling exports while generating jobs as well.
With the upcoming elections that has Obama and Romney pitted against each other, and with both sides accusing each other of favoring policies that shifts more manufacturing jobs to China, it comes as no surprise that the Obama administration has filed a number of WTO lawsuits challenging the country’s trade policy on rare earths, autos among other industries that its government supports.
So, why is this trade issue in regard to the auto industry so important to both China and the United States?
Simply put, both these governments apart from other countries see the auto exports as an important source of generating revenue while also creating high-paid jobs.
With statistics pointing to the drop in employment by half in the US auto parts sector between 2001 to 2010 and the imports from China increasing almost seven times since then, the evidence points to Chinese policies encouraging auto parts manufacturers to shift jobs to China while hurting employment in the United States.
And while China only exported 500,000 automobiles last year to developing countries, it is their production of tires, radios and aluminum wheels among other auto parts that are making their presence felt in European, US and Japanese markets – in particular, affecting smaller Western competitors.