U.S. Wins WTO Dispute: China Revokes 'Protectionist' Wind Subsidies

After having some of its wind power equipment subsidies disputed by the United States at the World Trade Organization, China has revoked its Special Fund for Wind Power Equipment Manufacturing subsidy.

The U.S. challenged that the subsidy was illegal as it provided grants to Chinese wind turbine manufacturers with the stipulation that the manufacturers had to purchase key parts and components produced in China.  The grants ranged between US$6.7 million and US$22.5 million.

In October 2010, the United Steelworkers Union (USW) petitioned to the U.S. government to investigate these prohibitive government incentives, which the Union claimed were protectionist measures that violated free trade by artificially promoting domestic goods at the expense of imports.

After conducting a significant investigation, the Office of the U.S. Trade Representative held WTO consultations with China in February.  These consultations resulted in China agreeing to remove the Special Fund.

Leo W. Gerard, the International President of the United Steelworkers, applauded the announcement, but also said there is more work to be done in ensuring China abides by the World Trade Organization's rules.  "The USW is pleased the [Obama] Administration has been able to obtain a termination of the unfair Chinese government program. Termination of this program is one less distorion in the marketplace for clean energy technology products."

Gerard added, "We need continued action on our other complaints in our petition to ensure that China's protectionist and predatory practices in the clean tech energy secto are eliminated."

The WTO requires that every country outline the details regarding its subsidies so that other countries can assess the nature and extent of the measures.  Since joining the WTO in 2001, China has been notorious for its lack of transparency regarding its subsidies.  The Special Fund for Wind Power Equipment Manufacturing represented another subsidy China has failed to disclose to the WTO.  To date, China has only submitted one subsidy notification in 11 years. 

U.S. Trade Representative Ron Kirk, chided the Chinese for their lack of transparency, "Even as we announce our success in this dispute, it is past time for China to be transparent about its subsidy programs, and that includes meeting its notification obligations like other WTO Members.  China is the second largest trader at the WTO, and it is simply not acceptable that China continues to evade its transparency commitments."

China and the United States are embroiled in a stiff competition to become the global leader in the clean energy technology market place.  Over the past year, the United States' has not only been replaced by China as the largest cleantech financier, it has also fallen behind in clean energy manufacturing, and its lack of progressive energy policy is driving clean energy businesses to other countries, including China.

Image credit: Official White House Photo by Samantha Appleton