Sunday, July 20, 2008

WTO rules against China on autopart tariffs

On Friday, the WTO ruled against China's tariffs (typically 25%) on foreign made autoparts. These tariffs are one of the reasons why Michigan auto parts companies have been laying off workers. China also has a 25% tariff on foreign vehicles. These tariffs are all part of China's mercantilist strategy of exporting as much as possible while importing as little as possible.

Instead of reducing its autoparts tariffs right away, China will appeal the decision. Here is a summary of some major facts about the the Chinese auto market that accompanied the Financial Times story about the WTO ruling:

  • China’s $19bn (€12bn, £9.5bn) vehicle market is the world’s third largest after the US and Japan
  • China’s exports of vehicles and parts jumped 45 per cent last year to $41bn
  • China’s imports of vehicles and parts rose 25 per cent in 2007 to $26bn
  • China’s export sales of car parts reached $2bn in 2007

The story also includes this snippet about Chinese motivation:

(T)he US, EU and Canada argued [that the Chinese tariff] was a protectionist device which was designed to discourage imports, build up China’s domestic motor manufacturing industry and force foreign part-makers to relocate manufacturing to China.

The $19bn (€12bn, £9.5bn) Chinese vehicle market is the world’s third largest after the US and Japan. Chinese manufacturers such as Chery have seen rises in both domestic and export sales above those of joint ventures between big US and European companies, such as General Motors and Volkswagen, though these still dominate the market.

Nothing in this decision would challenge the 25% Chinese tariffs on foreign vehicles of all sorts, including American and Japanese automobiles and motorcycles. Nor would anything challenge the Chinese currency manipulations which produce an additional 40% hidden duty on all foreign imports and a hidden 40% government subsidy on all Chinese exports.

The world is currently moving toward a global recession because the mercantilist countries have growing economies but are not buying and the United States, the chief victim of the mercantilist countries, has a stagnant economy and can no longer afford to buy as much.

While it is encouraging when WTO rules reduce tariffs between countries, such rulings do not do anything to fix what is clearly a broken international system.


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