Mar 09, 2012

On Tuesday, the U.S. House of Representatives approved a measure giving the Commerce Department power to penalize China and other state-dominated economies with higher import duties if they subsidize exports. The Senate approved the measure Monday. The bill will surely be signed by President Obama and placed into law.

China’s throwing a fit, although they admitted that “At some regional or subnational level there might be some subsidies that might be problematic.” They also threw the fact that the U.S. bailed out the U.S. auto industry in our face.

There are 24 existing orders to increase duties against products made in China that have received subsidies from their government.

I think the Chinese got caught with their hands in the cookie jar because from experience I know that back door deals with government officials… i.e. bribes… are a common occurrence.

On the other hand, it’s hard to argue that we didn’t “subsidize” General Motors in a big way when the U.S. government essentially took control of the company.

China’s sure to appeal to the WTO; it will be interesting to see how this all plays out. In the end I’m not sure the Chinese have a leg to stand on; but I wouldn’t be surprised to see them nail us with a few “duty hits” of their own to remind us that they’re our biggest banker.

Source: Washington Post