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September 20, 2012

US Elections Heat Up, China Trade Tensions Rise

by William Ide

Trade tensions between China and the United States escalated this week, with both countries filing international trade complaints against each other. And as the U.S. presidential campaign heats up, China is increasingly finding itself the focus of attention.

President Barack Obama and his opponent Mitt Romney are talking tough on trade with China.

Earlier this week, Obama announced a new World Trade Organization case over Chinese automobile subsidies. He also brushed off accusations from his opponent that he is not doing enough to pressure China on unfair trade practices.

Beijing quickly responded with a WTO case of its own, challenging a new U.S. law that allows duties on subsidized goods from China.

"Both sides should resolve our differences in an appropriate manner on the basis of mutual respect and equal benefits, through dialogue and consultation," said Foreign Ministry spokesman Hong Lei.  "We oppose the politicization of the issue, and the engagement in trade and investment protectionism.”

China’s Commerce Ministry responded to Washington’s WTO action more directly, arguing that Beijing is becoming a victim of election politics. But with the two countries’ economies so closely intertwined, analysts say it is becoming difficult to keep politics out of trade policy - especially as the U.S. economy continues to struggle.

"There is just an immense amount of frustration on both sides of the aisle [among both the Republican and Democrat parties] in the United States, in both parties in terms of what will work with China," said Patrick Chovanec, a Beijing-based economist.

Not too long ago, Chinese trade disputes were a more abstract foreign policy issue, but they are now widely viewed as directly affecting American jobs and prosperity. The high stakes lead to more complaints.

"Some of the measures that the Obama administration has pursued have more merit than others," said Chovanec. "Input subsidies with Chinese raw materials and rules preventing access for American movies are some of the things that have the greatest merit, and really deal with, sort of, important issues in terms of market access to China. The tire tariff I think was more of a sop to the steel workers unions, and there have been others that have been more political in nature.”

The auto trade case President Obama filed this week was his second in recent months, and both coincided with trips to Ohio, an auto manufacturing state that could prove crucial in the November elections.

In July, the Obama administration accused China of placing unfair duties on some $3 billion worth of U.S. car exports.  This week’s case focuses on $1 billion in subsidies the Chinese government provides companies for the export of cars and car parts.