By Jon Cassidy | Ohio Watchdog
COLUMBUS – President Barack Obama had a clear message for Cincinnati and Columbus during visits Monday: auto manufacturing is too important to the economy for the government to let it fall victim to foreign manipulation.
He promoted his administration’s $80 billion package to protect United Auto Workers contracts from General Motors’ bankruptcy restructuring and announced that the U.S. would be filing a new complaint with the World Trade Organization accusing the Chinese government of giving money to its own auto parts industry.
“The auto industry represents a country’s overall economic strength,” he said. “The government should provide vigorous support.”
Wait. Sorry. Obama didn’t say that. That was Zhang Ji, an official in China’s Ministry of Commerce, back in 2006.
The Chinese idea of vigorous support is less robust than Obama’s. Over an entire decade, some 73 Chinese auto parts companies got a total of $2.3 billion in direct subsidies (plus another $25 billion in indirect subsidies, such as cheap electricity and glass, etc.) from their government. At least, that’s the total found by the quasi-socialist Economic Policy Institute, the only think tank in the country known to argue that trade costs jobs. In its WTO complaint, the administration estimates China’s auto-industry “subsidies amounted to at least $1 billion from 2009 through 2011,” the Wall Street Journal reported.
By comparison, U.S. taxpayers now stand to lose $25 billion in cash the Obama administration gave to General Motors, plus another $15 billion-plus in tax breaks on future earnings.
Obama spoke harshly of (Chinese) government support for the (Chinese) auto industry: “Those subsidies directly harm working men and women on the assembly line in Ohio and Michigan and across the Midwest. It’s not right; it’s against the rules; and we will not let it stand.”
In March, 188 members of Congress wrote a letter to Obama, calling for him to file a complaint with the WTO.
The Obama administration did just that Monday, committing to the sort of Yellow Peril demagoguery that U.S. Sen. Sherrod Brown, D – Ohio, has made a career out of.
Lately, both parties have been menacing the populace with this imaginary hobgoblin. For more than a year, Republican Mitt Romney has been decrying Chinese “cheating” and making claims of currency manipulation that he surely knows to be fraudulent. In real life, the renminbi, China’s currency, has been steadily appreciating against the dollar since 2005.
U.S. Sen. Rob Portman, R – Ohio, took advantage of the announcement, too, and he’s not even running for anything.
“I continue to be disappointed that President Obama has refused to take on China’s manipulation of their currency, which he has failed to do seven times since being elected,” he said in a statement.
Here’s how China could increase the renminbi’s value: dump $1.2 trillion in Treasury bonds. Of course, that would drive up the interest the U.S. pays on its $16 trillion in debt, which Romney, Obama, and even Brown know.
China was quick to respond to Obama’s flexing, taking a complaint of its own to the WTO Monday, disputing a law signed in March that allows the ex post facto application of two kinds of tariffs to imports.
This is the latest escalation in a trade dispute Obama started in 2009 by putting a tariff on tire imports. China responded with a tariff on poultry imports and auto parts that cost the poultry industry more than $1 billion in lost sales, according to one study.
When the U.S. went after solar panels and 21 other products, China announced in December that it would impose tariffs on imported vehicles manufactured by Chrysler and General Motors, the beneficiaries of the auto bailout.
This is the eighth complaint against China Obama has filed with the WTO this year. In his 2012 State of the Union address, Obama bragged about his decision that started the fight: “Over a thousand Americans are working today, because we stopped a surge in Chinese tires.”
The Peterson Institute for International Economics, a nonprofit, nonpartisan, research organization that focuses on international economic policy, studied the effect of the tariff.
In addition to the $1 billion in lost poultry sales, the tariff indeed saved a maximum of 1,200 American jobs. But the cost to U.S. consumers paying the tariffs was $1.1 billion in 2011, and most of that went to tire companies, and most of those were foreign.
In other words, it cost the public $900,000 per job saved.
Obama scored political points with the tire tariff, but he may have realized the damage it caused. The three-year tariff is set to expire next week.
Trade attorney Scott Lincicome writes that the administration would have had to file the paperwork six to nine months ago if it wanted a renewal, but it did nothing.
If Obama actually believes what he says about trade, why would he let it die?
CORRECTION: An earlier version gave an incorrect figure for China’s U.S. Treasury securities holdings.
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