U.S. alleges unfair China auto subsidies in WTO action

— -- The Obama administration filed a complaint against China at the World Trade Organization on Monday, accusing it of unfair practices involving autos and components.

The U.S. accuses China of unfairly subsidizing its auto industry and auto parts exports, and in a separate, earlier action, alleges that the country imposed tariffs of "more than $3 billion" on "exports of American-produced automobiles," specifically, cars and SUVs with engines of 2.5 liters or more.

The Monday complaint, described by the administration as a routine challenge of trade violations filed now simply because the case was ready, comes after Republican ads accused President Obama of failing to challenge Chinese trade practices that put U.S. manufacturers at a disadvantage. Obama's Republican rival for president, Mitt Romney, says he would take a tougher stand against China.

Resolving such matters can take more than a year, so there is no immediate benefit to U.S. jobs or industry.

China, meantime, filed its own complaint at the WTO, headquartered in Geneva, challenging a new U.S.law on so-called countervailing duties. Those are tariffs imposed on goods from countries that the U.S.believes subsidize their exports.

The U.S. said that "China expressly agreed to eliminate all export subsidies when it joined the WTO in 2001."

Making it more expensive to buy China-made auto parts in the U.S. could help U.S. producers of those parts, as well as make it less inviting for U.S. parts makers to move operations to China.

And making it easier to send cars from the U.S. to China, a huge auto market that is growing rapidly, could be a boon to automakers based outside China.

The alternative, building vehicles in China, is daunting. The country now requires a foreign car company to take a Chinese partner and give that China company at least 50% ownership of the joint venture.

General Motors, however, has done well within that system.

GM says China is its biggest-volume market and in revenue is second only to the U.S. It also is the biggest market for GM's Buick brand. GM's partner is Shanghai Automotive Industry Corp. (SAIC). Their 50/50 joint venture is Shanghai General Motors.

GM has other joint ventures and two wholly owned foreign enterprises, and 35,000 employees in China.

The fact that the government filed the complaint, rather than an automaker or other manufacturer, helps companies avoid a "great deal of pressure and retaliation by the Chinese government," says trade expert Clyde Prestowitz, founder of the Economic Strategy Institute and an adviser to the Reagan administration.

Officially, the U.S. "requested dispute settlement consultations with the government of China at the World Trade Organization."

Prestowitz says there is "little doubt that China has been subsidizing" its auto and auto-parts industries and if the U.S.action halts that, it could "provide significant relief to U.S.-based producers, and increase jobs in the U.S. auto industry."

But it can take years and "cost a fortune" to pursue WTO actions such as the U.S.filed, he notes, so no benefits will occur soon.