Monday, October 18, 2010

U.S. Investigates China Re: Green Technologies Trade & Investment

Oct 15: U.S. Trade Representative Ron Kirk announced that the United States has initiated an investigation under Section 301 of the 1974 Trade Act with respect to acts, policies and practices of the Government of China affecting trade and investment in green technologies. The investigation has been initiated in response to a petition filed by the United Steelworkers (USW) on September 9, 2010.

    The 5,800-page USW submission alleges that China employs a wide range of World Trade Organization (WTO)-inconsistent policies that protect and unfairly support its domestic producers of wind and solar energy products, advanced batteries and energy-efficient vehicles, among other products, as China seeks to become the dominant global supplier of these products. According to the petition, these policies include export restraints, prohibited subsidies, discrimination against foreign companies and imported goods, technology transfer requirements, and domestic subsidies causing serious prejudice to U.S. interests. The petition further alleges that China's policies have caused the annual U.S. trade deficit in green-technology goods with China to increase substantially since China joined the WTO, making China the top contributor to the U.S. global trade deficit in the sector.

    Ambassador Kirk said, "The USW has raised issues covering a wide array of Chinese government policies affecting trade and investment in green technologies. This is a vitally important sector for the United States. Green technology will be an engine for the jobs of the future, and this Administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs. We take the USW's claims very seriously, and we are vigorously investigating them. In light of the large number of allegations and the extensive documentation accompanying them, I have asked my staff to utilize the 90-day period allowed by statute to thoroughly examine and verify the USW's claims. For those allegations that are supported by sufficient evidence and that can effectively be addressed through WTO dispute settlement, we will vigorously pursue the enforcement of our rights through WTO litigation."

    The investigation will consider whether acts, policies, and practices of the Chinese government deny U.S. rights or benefits under the GATT 1994, under the Subsidies and Countervailing Measures Agreement (SCM Agreement), and under China's Protocol of Accession to the WTO. Because the issues covered in the China-Green Technology investigation involve U.S. rights under the WTO Agreement, any consultation request will be made under the WTO Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and unless consultations result in a mutually acceptable resolution, the U.S. Trade Representative will request the establishment of a WTO panel under the DSU.

    USW released a statement from International President Leo Gerard indicating, "President Obama showed again today that fighting for U.S. workers and their jobs is his top priority.  He's backed up his commitment to a clean energy future by making it crystal clear that future is going to benefit all Americans. By accepting the petition the Steelworkers filed against China's predatory and protectionist policies, it sends the message that America is not going to stand by while our jobs get outsourced.  China and all of our trading partners need to understand that we want fair trade and that we're not going to allow unfair and illegal trade practices to deny our farmers, workers and businesses of the opportunity to compete on a level playing field. . ."
    The USW 301 petition addressed five specific areas:
  • Restrictions on access to critical materials:  Many green technologies depend on critical rare earth elements and other minerals, and China produces 90 percent of the world's supply of these essential inputs.  China denies U.S. producers free access to these inputs (and gives its own producers privileged access to them) through a combination of export quotas, export taxes, and export licenses that violate WTO rules.
  • Performance requirements for investors:  The Chinese government has the power to approve or disapprove of foreign investment agreements in its territory; in practice, joint venture agreements in the green technology sector routinely require U.S. investors to license key technologies to their Chinese counterparts.  Such requirements, if imposed as a condition of investment approval, violate China's WTO commitments. 
  • Discrimination against foreign firms and goods:  China requires that the level of domestic content be considered in approving wind farm concessions, and reportedly required it's first approved solar power plant to use 80 percent Chinese goods.  These and other discriminatory requirements violate WTO rules.
  • Prohibited export subsidies and prohibited domestic content subsidies:  China requires recipients of certain green technology subsidies to use Chinese over imported components or to export a minimum level of production, contrary to WTO rules.  In addition, China outspends the U.S. by 5 to 1 in export credits and insurance, and refuses to conform these subsidies for green technology exports to WTO rules.
  • Trade distorting domestic subsidies:  China's massive subsidies for domestic producers of green technology have propelled its producers over U.S. firms, shut the U.S. out of China's wind market, seized market share from the U.S. in Europe's wind and solar markets, driven down world prices, and caused lost sales in the U.S. market.  The harm these subsidies are causing makes them actionable at the WTO.

    Access Trade Representative blog posting (click here). Access a release from USW on the petition filing and link to a 4-page executive summary (click here). Access a release from USW on the Administration's action (click here).