Employees work on wind turbines at a Gamesa factory in Tianjin, China. Washington is challenging a government fund in China that awards grants to makers of wind power equipment. By SEWELL CHAN
Published: December 22, 2010
WASHINGTON — The Obama administration filed a case against China with the World Trade Organization on Wednesday, siding with an American labor union, the United Steelworkers, in accusing Beijing of illegally subsidizing the production of wind power equipment.
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The decision is the second time in less than four months that the United States has accused China of violating world trade rules.
It represents an escalation of trade tensions between the United States and China over clean energy, viewed by the Obama administration as a frontier in which American companies are struggling to remain competitive.
The United States is challenging a special Chinese government fund that awards grants to makers of wind power equipment. The Americans say the fund provides subsidies that are illegal under W.T.O. rules because the grants appear to be contingent on manufacturers using parts made in China.
“Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under W.T.O. rules,” Ron Kirk, the United States trade representative, said in a statement. “These subsidies effectively operate as a barrier to U.S. exports to China. Opening markets by removing barriers to our exports is a core element of the president’s trade strategy.”
China’s Ministry of Commerce issued a brief statement on its Web site early Thursday afternoon in Beijing, defending the country’s policies but providing few specifics. “Measures to develop wind energy in China are conducive to energy conservation and environmental protection as well as an important means of achieving sustainable development, and are consistent with W.T.O. rules,” the statement said.
The individual grants available under the Chinese program range from $6.7 million to $22.5 million. Chinese makers of wind turbines and associated parts can receive multiple grants as the size of the wind turbine models increases.
Total subsidies under the program since 2008 could amount to several hundred million dollars, according to Mr. Kirk’s office.
The United Steelworkers, which had protested the Chinese wind power fund as part of a larger, 5,800-page trade complaint it filed with the American government on Sept. 9, said the administration’s decision was only a first step in addressing a “vast web of protectionist policies” by Beijing.
“The goal is not litigation,” Leo W. Gerard, the union’s president, said in a statement. “It’s to end their practices.”
The accusation on Wednesday is the first step in the W.T.O.’s process for settling disputes.. If China and the United States cannot reach a solution through consultations, the United States may request the establishment of a W.T.O. dispute settlement panel.
Members of Congress who have been pushing for a bolder stance against China on trade, currency and other commercial matters, applauded the decision to file the case.
“The United States needs to take a more assertive approach to China’s mercantilist policies, and the administration’s action today is a welcome step in the right direction,” said Representative Sander M. Levin, a Michigan Democrat and the chairman of the House Ways and Means Committee, which oversees trade.
Senator Sherrod Brown, an Ohio Democrat, said in a statement that China was on track to make half of the world’s wind turbines and solar panels and urged the administration to make trade enforcement a priority.
“The United States cannot replace its dependence on foreign oil with a dependence on clean energy technology made in China,” he said. “American manufacturing must lead the way — and to do this, they need a level playing field.”
The action grows out of an investigation Mr. Kirk’s office initiated on Oct. 15 in response to the Steelworkers’ case, which covered a range of practices in the clean-energy sector, including prohibited subsidies, export restraints and discrimination against foreign companies and imported goods.The case, known as a Section 301 complaint under the Trade Act of 1974, has been the subject of several talks between Chinese and American trade officials.
After two days of meetings last week in Washington, part of an annual forum known as the United States-China Joint Commission on Commerce and Trade, China agreed to lift one barrier to foreign developers seeking to build wind farms there. The Chinese government will allow overseas experience in wind farm development, and not just experience in China, to qualify the developers for Chinese projects.
But several other barriers remain: foreign developers are banned from offshore projects for what China describes asnational security reasons, are not allowed to borrow as much money as domestic developers and are prohibited from selling carbon credits from their wind farms.
Mr. Kirk said his office would continue to investigate other parts of the Steelworkers’ complaint but was not planning additional filings under Section 301, which authorizes the president to take “all appropriate action,” including retaliation, against practices by foreign governments that violate international trade agreements or discriminate against American commerce.
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“We will continue to work closely with the U.S.W. and other stakeholders in the months ahead on the remaining allegations,” Mr. Kirk said. “If we are able to develop sufficient evidence to support those allegations and they can be effectively addressed through W.T.O. litigation, we will pursue the enforcement of our rights at the W.T.O. independently of Section 301.”
That statement prompted Mr. Levin and Mr. Gerard to call for trade enforcement to receive greater priority and more resources. Trade complaints are notoriously complex and involve extensive investigations before the government can file a case before the W.T.O. in Geneva.
General Electric, which is a major supplier of wind energy equipment but has been sensitive about antagonizing officials in China, where it has substantial business, declined to comment on the decision.
John Frisbie, the president of the United States-China Business Council, which represents American businesses working in China, reacted cautiously.
Mr. Frisbie said the decision “appears to be an appropriate first step,” but that disputes between W.T.O. members are “nothing new or unique.”
Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, said that the United States “can be a world leader in turbine manufacturing and exports” and that “any practice that tilts the global playing field unfairly would be of serious concern to our members who want to play a role in China, which has become the world’s largest wind market.”
Keith Bradsher contributed reporting from Hong Kong.
A version of this article appeared in print on December 23, 2010, on page B1 of the New York edition.
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