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China’s Trade Policies: Automobiles Show the Difficulties the US Faces in Reducing the Trade Deficit with China

ArmchairPolitician.china, March 23, 2017, By Brad Peery, ArmchairPolitician.US

US Automobile companies are effectively banned from competing in China. US Automobiles are taxed at a rate of 25%, that effectively makes US produced automobiles uncompetitive in China. There also Chinese policies that are anticompetitive, even for companies that want to establish manufacturing plants in China.

The industrial sector, in the past, accounted for the largest part of GDP, followed by agriculture. In 2013 the service sector became the largest contributor to GDP.

China joined the World Trade Organization (WTO) in 2001. However, the old system, the Catalogue for Guiding Foreign Investment in Industries remains in place. The Catalogue, revised most recently in 2015, divides China’s economy into four categories for foreign investment purposes: prohibited; restricted; permitted; and, encouraged.

Encouraged industries, make up about 75% of the Catalogue, but automobiles are an example of how China protects certain local companies. China views automobiles as a strategic industry, because it is important to China’s development of high tech manufacturing. In addition to the 25% tariff on imported automobiles, any company wishing to manufacture cars in China must work with a Chinese joint venture partner. This requirement can lead to those joint venture companies stealing the intellectual property of their partners. China has said it may ease auto industry regulations within 8 years.

Sales of imported cars are 4%, of the 24.4 million vehicles produced in 2016, about the same as 15 years earlier.

ArmchairPolitician.US Opinion: Since Chinese automobiles are not an important factor in the US trade deficit with China of $347 billion in 2016, any import taxes on Chinese goods would need to be applied to other goods manufactured in China. The trade deficit with China is a part of overall US policies with China. In addition to import tariffs, and restrictions on US investment in China, including the transfer of US intellectual property to Chinese companies, the issues with China are many, with some of them being: Chinese manipulation of their currency to increase US imports; The buildup of Chinese artificial islands in the South China Seas; Taiwan, and the issues of a one-China Policy; and, China’s relationship with North Korea, and their unwillingness to confront their nuclear ambitions.

33 comments to China’s Trade Policies: Automobiles Show the Difficulties the US Faces in Reducing the Trade Deficit with China

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      Book: WWW. Amazon.com, Trump’s Political Agenda and Achievements
      Blog Site: http://WWW.ArmchairPolitician.US
      Email: ArmchairPolitician.US@gmail.com

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