In a major victory for U.S. manufacturers, China has agreed to end subsidies to wind power companies that use domestically-sourced components:
The action is significant because of intense competition between U.S. and Chinese manufacturers of clean energy technology. Whether it will lead to other such actions involving questionable Chinese trade practices remains unclear.
“This issue has been a huge one,” says Barry Bosworth, an economics and trade expert at the non-partisan Brookings Institution. “It’s symptomatic of a principle that would apply across a wide range of trade.”
The World Trade Organization prohibits government programs that give preferences to companies using local products, such as China’s program of “indigenous innovation.” The wind power grants ranged from $6 million to $22 million, Kirk’s office says. “This outcome helps ensure fairness for American clean technology companies and workers,” Kirk says.
The case marks the third successful challenge against Chinese government subsidies brought by the U.S. and other countries. China agreed to eliminate other subsidies following complaints filed by the U.S., Mexico and Guatemala in 2007 and 2008.
In December, just weeks before a visit by Chinese President Hu Jintao to Washington, the US lodged a complaint with the WTO, saying China had provided several hundred million dollars in illegal grants since 2008 to wind turbine makers for using Chinese components.
The assistance ran as high as $22.5 million for a single grant, it said.
The complaint arose from a petition by the United Steelworkers union last September, alleging illegal Chinese subsidies for domestic makers of a range of green technology goods, including wind and solar energy products, advanced batteries and energy-efficient vehicles.
At the time of the complaint, the USTR said China’s support amounted to “more than twice as much as the US spent in the sector and nearly half of the total ‘green’ stimulus spent worldwide.”
The USTR also said China was generally secretive about subsidies, in violation of WTO rules.
China’s wind industry remains unflustered by the news, according to Xinhua:
China’s wind power companies expect to see little impact from the recent news that the country will end industry subsidies because of the investigation launched seven months ago following complaints from US manufacturers.
“It is understandable that the Chinese government is ending subsidies to an industry that is strong enough to compete with international players,” said Shi Pengfei, vice-president of the China Wind Energy Association ….
The grants ranged from $6 million to $22 million, according to the report ….
However, Chinese companies said the value of the grants is small when it comes to each maker’s portion and the subsidy’s end is unlikely to make a big splash.
Read more about wind power in China via CDT.