CHINA’S TRADE HEADACHE

President Barack Obama and President Hu Jintao of China.

HONG KONG (CNNMoney) — The Obama administration will file a complaint Monday with the World Trade Organization, alleging that China has illegally subsidized automotive exports and undercut American suppliers.

The complaint accuses China of providing $1 billion in illegal subsidies to auto and auto-part exporters between 2009 and 2011, according to a senior administration official.

The administration says the benefits provided to Chinese companies violate a WTO prohibition on “export-contingent subsidies.”

Chinese cars are not yet common in the U.S., but exporters have managed in recent years to quickly ramp up their shipments of auto parts to the world’s largest economy.

The White House estimates that up to 60% of China’s automotive industry exporters benefit from the subsidies, making it hard for American companies to compete.

In a related case, the administration launched a complaint against China with the WTO in July over $3 billion in duties Beijing placed on U.S. auto exports.

Related: Obama’s mixed record on trade

In the interconnected global economy, trade is becoming ever more important to the average American worker. Exports can provide jobs in fields from agriculture to aircraft, from movies to manufacturing. Conversely, U.S. industries face increasing competition from imports, forcing the weaker companies out of business.

The U.S. trade gap with China, the nation’s most important — and controversial — trading partner, widened to a record $280 billion last year, and is on pace to get even bigger this year.

However, the Obama administration can point to some victories regarding China. This includes getting Beijing to let its currency, the yuan, rise in comparison to other currencies, rather than keeping it pegged to the dollar.

That has reduced one of the key advantages Chinese exporters have when competing with U.S. companies: when the yuan is undervalued, it drives down the cost of Chinese goods, giving those goods an advantage in the marketplace.

Since China loosened the peg to the dollar, the yuan has gained nearly 8% in value.

The Obama administration also says it’s getting tough on China. It has filed more trade cases against China than did the Bush administration, winning fights to protect a number of industries, such as tires.

But critics of U.S. trade policy with China say more is needed, even if it sparks retaliation.

Related: China growth forecasts shrink as economy stumbles

The auto trade complaint by the White House takes place as President Obama once again steers his campaign to Ohio — a state saturated with auto part suppliers and industry workers.

Manufacturing, the auto industry and its bailout are all issues central to the presidential campaign, and Ohio is crucial to the president’s re-election plans.

While the complaint comes just months before Election Day, frictions between the U.S. and China over trade are not new. The automotive industry has been a particular hot spot, with both sides trading barbs in recent years.

Mitt Romney, the Republican nominee, has taken a combative stance toward China. The former Massachusetts governor has pledged to label China as a “currency manipulator” and hit the country’s exports to the U.S. with tariffs.

Some observers worry that if Romney follows through with his plans, a trade war could erupt between the two economic mega-powers.

— CNN’s Jessica Yellin and Dan Lothian contributed to this report.

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Article source: http://rss.cnn.com/~r/rss/money_topstories/~3/UExto6hTK4w/index.html

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