China to launch case against Big Three automakers

WASHINGTON (Reuters) - China has told the United States it is launching a trade investigation that could lead to new import duties on autos and sports utility vehicles made by Chrysler, Ford and General Motors, a U.S. industry official said on Wednesday.

The action comes as U.S. Commerce Secretary Gary Locke, Trade Representative Ron Kirk and Agriculture Secretary Tom Vilsack are in China for high-level talks aimed at resolving trade irritants between the two countries.

President Barack Obama, who will visit China in mid-November, angered Beijing last month by slapping a 35-percent duty on imports of Chinese-made tires which totaled about $1.8 billion last year.

China immediately challenged the action at the World Trade Organization and also said it would launch an anti-dumping and countervailing-duty investigation against U.S. autos to offset unfair pricing and government subsidies.

"The documents containing the charges were presented by China to the U.S. government this week, but have not yet been translated. Therefore we are not in a position to comment on the matter at this time," Steve Collins, president of the American Automotive Policy Council, told Reuters.

He estimated the traditional Big Three U.S. automakers export about 9,000 vehicles to China.

Total U.S. passenger car exports to China -- which would also include those made by manufacturers such as BMW and Nissan -- were $1.1 billion in 2008.

Although a small amount of total U.S. auto exports, China's action could set a troubling precedent for the industry if other countries were to follow suit.

Also, China has surpassed the United States this year as the world's largest auto market and analysts expect its demand for new cars to grow exponentially in coming years.

GM and Chrysler have received more than $64 billion combined in bailout and bankruptcy financing from the government this year.

PETITION BY UNION WORKERS

Ford did not seek or receive any federal bailout money. But they did get funds from the Department of Energy to help convert facilities to make more fuel-efficient cars.

Obama approved the 35-percent tire tariff in response to a petition filed by union workers, who said a surge in imports from China had forced U.S. tire makers to close plants.

Both Kirk and Locke have defended Obama's tire decision as legal under the terms of China's accession to the WTO.

Beijing agreed when it joined in 2001 to let countries curb its exports in response to a market-disrupting surge. But the United States had never before used the provision, which China feels it was forced to accept.

In a gesture more favorable to Beijing, Obama's Treasury Department decided this month against formally labeling China as a currency manipulator -- despite Obama's tough rhetoric on that issue during last year's presidential campaign.

But U.S. textile, steel and some other manufacturers continue to gather sponsors in the Senate and House of Representatives for a bill that would allow the United States to slap anti-dumping or countervailing duties on goods from countries that "undervalue" their currency.

China manages the value of its currency, the renminbi, within a narrow range against the dollar, removing any advantage a weak dollar might have in lowering the price of U.S. goods in China.

The same groups have urged Kirk and Locke to press China on currency concerns during this week's meeting of the U.S.-China Joint Commission on Commerce and Trade.

They say China deliberately undervalues its currency to give its companies an unfair trade advantage.

(Additional reporting by John Crawley; Editing by Philip Barbara)