GM May Boost China Production Due to Tariffs, JPMorgan Says

[brentspeak]

http://www.businessweek.com/news/2011-12-14/gm-may-boost-china-production-due-to-tariffs-jpmorgan-says.html

December 14, 2011, 4:56 PM EST

By Craig Trudell, Chris Reiter and Siddharth Philip

Dec. 14 (Bloomberg) -- General Motors Co. may hasten plans for boosting output in China after regulators in the world’s largest auto market said they will impose anti-dumping duties on some vehicles imported from the U.S.

Punitive duties of as much as 12.9 percent for its autos “may accelerate GM’s localization plans,” Himanshu Patel, a New York-based analyst for JPMorgan Chase & Co., wrote today in a note to clients. The Detroit-based automaker already plans to add local production in China and just 1.3 percent of GM’s 2.43 million sales in China last year were imported, he wrote.

China’s decision to increase import levies comes three months after the World Trade Organization rejected its appeal of a ruling backing U.S. duties on tire imports. China’s auto sales are rising at the slowest pace in 13 years, pressuring local producers to consolidate as foreign carmakers post gains.

“The move shows that China is always capable of intervening politically in its markets,” said Juergen Pieper, a Frankfurt-based analyst with Bankhaus Metzler. “The automobile industry is very dependent on China for growth, and there’s doubts about the pace of future expansion.”

[JDPriestly]

1. Yet, China has a huge balance of payment surplus with us.

Greedy bunch if you want to ask me.

I am making a supreme effort to avoid buying anything made in China this Christmas.

Yesterday I went to a store and searched and searched until I finally found something made in --- (don't hold your breath) --- India. Not much better, but at least it wasn't made in China.

[DJ13]

2. Why is it that tariffs are considered a violation of the WTO if we talk about them

But business as usual when a host of other countries impose them when they see fit?

[unblock]

3. as much as we whine about obama, congress, banks, our deficits, europe, etc., CHINA is much to blame

for the global economic mess we're in. just think about the effects of a notably stronger yuan:

- offshoring is no longer as cheap. more of an incentive to build plants in america and hire americans.

- imports are no longer as cheap. more of an incentive to buy american.

- exports ARE cheaper. more of an incentive for the world to buy american instead of buying chinese.

not all the effects are pure, and not all of them are good (overall prices increase, some of the offshoring would simply go to different countries, etc.) but our situation would be MUCH aided by a more reasonable exchange rate with china.

for all the crap we hear about free trade, we don't really have it when our counter-parties manipulate the markets to their advantage and we tend not to fight back because the interests of american people are not aligned with the interests of the american businesses abroad.

[Bozita]

4. Free trade, my ass!

China to levy tariffs on U.S. automakers for sedans, SUVs
3:42 PM, Dec. 14, 2011
By Todd Spangler
Detroit Free Press Washington Staff


WASHINGTON – China’s Commerce Ministry announced today it will levy tariffs on U.S. automakers for imports of sedans and SUVs, touching off bipartisan criticism of Chinese officials in the nation’s capital.

House Ways and Means Chairman Dave Camp, R-Midland, and the committee’s ranking Democrat, Rep. Sander Levin, D-Royal Oak, issued a joint statement calling China’s action, which will directly affect Detroit-area automakers unjustifiable.

“Unfortunately, this appears to be just one more instance if impermissible Chinese retaliation against the United States and other trading partners,” the congressmen said in the statement.

They added that it appears the decision violates China’s commitments to the World Trade Organization and asked President Barack Obama and his trade officials to “exercise all available option to enforce U.S. rights.”

more...
http://www.freep.com/article/20111214/BUSINESS01/111214034/China-tariffs-U-S-automakers?odyssey=tab|topnews|text|FRONTPAGE

[pampango]

5. NYT: One challenge for China ... is whether Wednesday’s action will be allowed under W.T.O. rules.

http://www.nytimes.com/2011/12/15/business/global/china-imposes-new-tariffs-on-some-vehicles-from-the-us.html?pagewanted=1&_r=1

The Chinese Commerce Ministry’s announcement on Wednesday was the latest in a series of zigzags on trade policy this autumn, as Chinese officials have struggled over how confrontational a stance to take now that the Obama administration has begun to challenge Chinese trade policies more aggressively.

The White House announced last week that it would ask the World Trade Organization next Monday to open an investigation into Chinese restrictions on imports of American broiler chickens. More significantly, Chinese government agencies and companies have been furious about a current American investigation into whether Chinese exports of solar panels to the United States might have received illegal subsidies or been dumped in the American market at prices below the cost of manufacturing them.

According to the U.S.-China Business Council, the U.S. exported $4.5-billion worth of vehicles to China in 2010, an increase of over 134% from the previous year.

One challenge for China, which recently celebrated its 10th anniversary as a member of the World Trade Organization, is whether Wednesday’s action will be allowed under W.T.O. rules. The trade organization places many limits on a member nation’s ability to impose antidumping and antisubsidy measures, particularly on goods from countries that the W.T.O. has declared as having market economies, like the United States. “Dumping” might be hard to demonstrate, given that the prices of the American vehicles — even before China’s tariff and tax mark-ups — tend to be higher than in the United States.

China started the automotive trade case after President Obama imposed steep tariffs on surging imports of Chinese tires in September 2009. After a lengthy inquiry, the W.T.O. ruled this autumn that the American tariffs on tire imports had complied with international trade rules.

Sounds like China is upset about the success Obama has had challenging some of their trading practices. They want to do the same to the US but they don't have the facts on their side.

[FarCenter]

7. Note that this is against GM and Chrysler, not Ford

GM and Chrysler recieved significant subsidies during the bailout. The Chinese may be on sound footing at the WTO.

[FarCenter]

6. It is in retaliation for the tariffs that the US imposed on Chinese tires

China Moves to Retaliate Against U.S. Tire Tariff

By KEITH BRADSHER - Published: September 13, 2009
HONG KONG — China unexpectedly increased pressure Sunday on the United States in a widening trade dispute, taking the first steps toward imposing tariffs on American exports of automotive products and chicken meat in retaliation for President Obama’s decision late Friday to levy tariffs on tires from China.
...
Mr. Obama’s decision to impose a tariff of up to 35 percent on Chinese tires is a signal that he plans to deliver on his promise to labor unions that he would more strictly enforce trade laws, especially against China, which has become the world’s factory while the United States has lost millions of manufacturing jobs. The trade deficit with China was a record $268 billion in 2008.
...
China exported $1.3 billion in tires to the United States in the first seven months of 2009, while the United States shipped about $800 million in automotive products and $376 million in chicken meat to China, according to data from Global Trade Information Services in Columbia, S.C.

http://www.nytimes.com/2009/09/14/business/global/14trade.html

[brentspeak]

8. No, that's just the official excuse

Multinationals -- especially GM -- will be extremely happy with China's protectionist stance: it gives them "cover" to relocate even more manufacturing over to China.