Brake still on until Bush goes
THE INCOMING OBAMA administration in the United States could find itself caught up in a big early battle at the World Trade Organisation. At issue will be massive financial assistance – “bail-out” in current jargon – for the deeply troubled US vehicle manufacturing industry. It’s even possible that by the time this report is printed, the Democrats will have got Congress to vote the industry large interim aid.
But that will in any case only be a sideshow, because until Barack Obama formally becomes US president on 20 January next year, George W Bush will remain in the White House still holding veto powers. Therefore, the crisis facing the US vehicle industry can’t get any long-term relief from the US government – if any such relief, even partial, is ultimately possible – from actions over just a few months.
Further, the Republicans are opposed (with a few important exceptions) to an attempted major government rescue of the vehicle industry. They’ve called the car makers “dinosaurs” and say lead company General Motors should rather seek protection under US bankruptcy laws and then look to profitable reconstruction.
Crucially, that would mean a drastic reduction in the crippling health and pensions costs that GM incurs for tens of thousands of past and current workers. But huge Federal financial backing for the US vehicle industry will surely attract sharp criticism from the other vehicleproducing nations. That could see the whole matter being referred to the WTO for all kinds of rulings.