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American hypocrisy in auto rescue spurs me-too trade Ire


November 21, 2008
By Jennifer M. Freedman

Nov. 21, 2008 – A U.S.-triggered spate of global
carmaker-bailout proposals may spark trade disputes over whether
the Americans are unfairly trying to subsidize their industry or
just making up for state aid foreign rivals already enjoy.

A U.S.-triggered spate of global
carmaker-bailout proposals may spark trade disputes over whether
the Americans are unfairly trying to subsidize their industry or
just making up for state aid foreign rivals already enjoy.

As the U.S. considers a lifeline for its automakers,
officials in Europe, Canada and Asia are considering their own
aid packages — even as the European Union threatens to lodge a
complaint against any U.S. bailout to protect manufacturers from
Renault SA in France to Fiat SpA in Italy.

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China also may complain, though the government is
considering helping SAIC Motor Corp. and Guangzhou Automobile
Group Co.

Any World Trade Organization complaints may open a
Pandora's Box, bringing to a head a long-simmering dispute over
policies that U.S.-based General Motors Corp., Ford Motor Co.
and Chrysler LLC say unfairly aid rivals, including state-
financed health-care and retirement benefits, and currency
policies.

“Frankly, it's stones and glass houses,'' said Garel Rhys,
professor of automotive economics at Cardiff Business School in
Wales. “Everybody has been at this game for their own
interests; nobody is pure.''

Neelie Kroes, the European Union's antitrust chief, weighed
in on the debate today, urging the bloc's 27 nations to avoid
the “costly trap of a subsidy race'' that would give some
countries unfair advantages.

Greater `Temptation'

“The temptation may be greater now for member states to
give subsidies that can result in their economic problems being
exported to their neighbors, but that would only worsen the
economic difficulties,'' Kroes said at a conference in Brussels.

“The European economy and European taxpayers will be
better off if politicians choose another, more effective,
route,'' Kroes added. She pointed to EU rules that allow limited
aid that doesn't distort competition, including grants for
entrepreneurs, research, education and environmental projects.

The U.S. kicked off the bailout war. Congress is trying to
reach a compromise on giving automakers $25 billion they say
they need to survive the next year, either by speeding up the
use of funds already approved to develop more fuel-saving
technologies and models or providing a new source of funds.
President-elect Barack Obama supports helping the industry.

 

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