China Toughens Trade Stance with Tariffs

[2011-12-31 10:07:34]


China has fired a warning shot with its decision to impose tariffs on imports of sport-utility vehicles (SUV) and other large cars from the United States as both countries gear up for increased trade friction next year.

The tariffs, announced on Dec. 14, 2011 and ranging from 2 percent to 22 percent, are unlikely to inflict much pain on American carmakers, who generally only import a small fraction of what they sell in China.

But by hitting a powerful industry that has benefited from a U.S. government bailout, China can signal a tough stance in the face of rising pressure over its trade practices while at the same time pressuring American companies into lobbying on its behalf.

"It's a threat to companies, to say that you'd better lobby your government not to impose more tariffs because that could lead to a trade war and that's going to hurt you here," said Usha Haley, professor of international business at Massey University in New Zealand, who studies the Chinese auto sector.

"It's an extremely effective way of working."

China's move comes as the United States -- increasingly frustrated with a mammoth trade deficit and what it calls unfair treatment of U.S. companies in China -- changes its own tactics.

Instead of focusing on dumping of cheap Chinese-made goods, it is building a case that China's support for state-owned firms -- from discounted land and electricity prices to loans that can be perpetually rolled -- violates World Trade Organization rules.

Arguing that China isn't playing fair will appeal to U.S. politicians in an election year when jobs are a sore point.

A WTO appeals panel overturned the first American attempt to apply anti-subsidy measures against Chinese steel, sacks and tyres, but left the door open for a more nuanced case that China subsidizes its state-owned sector.

"The U.S. is getting ready to be a lot tougher on China on trade. They are doing a top-to-bottom review in Washington," said James McGregor, senior consultant for APCO Worldwide in Beijing.

"It's going to get at the whole state-owned sector and at subsidies that are hard to quantify."

At a news conference on Dec. 15, 2011, a Ministry of Commerce spokesman declined to explain why China had chosen to target car imports.

Source: Reuters
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