When I saw this NY Times article the other day, I thought, it's just a matter of time before there are some big trade cases on clean energy subsidies:
Until very recently, Hunan Province was known mainly for lip-searing spicy food, smoggy cities and destitute pig farmers. Mao was born in a village on the outskirts of Changsha, the provincial capital here in south-central China.
Now, Changsha and two adjacent cities are emerging as a center of clean energy manufacturing. They are churning out solar panels for the American and European markets, developing new equipment to manufacture the panels and branching into turbines that generate electricity from wind. By contrast, clean energy companies in the United States and Europe are struggling. Some have started cutting jobs and moving operations to China in ventures with local partners.
The booming Chinese clean energy sector, now more than a million jobs strong, is quickly coming to dominate the production of technologies essential to slowing global warming and other forms of air pollution. Such technologies are needed to assure adequate energy as the world’s population grows by nearly a third, to nine billion people by the middle of the century, while oil and coal reserves dwindle.
But much of China’s clean energy success lies in aggressive government policies that help this crucial export industry in ways most other governments do not. These measures risk breaking international rules to which China and almost all other nations subscribe, according to some trade experts interviewed by The New York Times.
A visit to one of Changsha’s newest success stories offers an example of the government’s methods. Hunan Sunzone Optoelectronics, a two-year-old company, makes solar panels and ships close to 95 percent of them to Europe. Now it is opening sales offices in New York, Chicago and Los Angeles in preparation for a push into the American market next February.
To help Sunzone, the municipal government transferred to the company 22 acres of valuable urban land close to downtown at a bargain-basement price. That reduced the company’s costs and greatly increased its worth and attractiveness to investors.
Meanwhile, a state bank is preparing to lend to the company at a low interest rate, and the provincial government is sweetening the deal by reimbursing the company for most of the interest payments, to help Sunzone double its production capacity.
Then a few hours later, I saw this from Reuters:
The United Steelworkers union said on Wednesday it planned to file a comprehensive trade case against "protectionist and predatory practices" used by China to support its clean energy sector.
The case, which the union plans to detail on Thursday, could ratchet up trade tensions across the Pacific at a time when many U.S. lawmakers are frustrated with China's currency and trade policies.
"China has utilized hundreds of billions of dollars of subsidies, performance requirements, preferential practices and other trade-illegal activities to advance their domination of the (alternative and renewable energy) sector," the steelworkers said in statement announcing their plans for a news conference to discuss the case.
The union is filing a nearly 6,000-page petition with the U.S. Trade Representative office asking it to launch an investigation into the group's charges.
It outlines "five major areas of protectionist and predatory practices utilized by the Chinese to develop their green sector at the expense of production and job creation here in the U.S.," the steelworkers said.
By law, the Obama administration has 45 days from the date of filing to determine whether to accept the petition for further action, the steelworkers said.
That would make Oct. 24 the latest date for a decision, or 10 days before the Nov. 2 congressional elections in which President Barack Obama's fellow Democrats are battling to keep control of both chambers of Congress.
Here's the U.S. Steelworker's announcement and here's a summary of the petition. And here's what President Obama said in a speech the other day:
We see a future where we invest in American innovation and American ingenuity; where we export more goods so we create more jobs here at home; where we make it easier to start a business or patent an invention; where we build a homegrown, clean energy industry -- because I don’t want to see new solar panels or electric cars or advanced batteries manufactured in Europe or Asia. I want to see them made right here in the U.S. of A by American workers.
My guess is that as long as clean energy subsidies are for production, rather than consumption, trade frictions are going to continue for a long time.
One final point, which comes from Scott Lincicome, is that, in a sense, the complaint is not so much that China is providing subsidies, but that they are providing more subsidies than the U.S. government is:
What is surprising, however, is that the USW petition freely admits that US companies (and their unions, natch) have received tons of government cheese:
China’s massive domestic subsidies to green technology are distorting trade and harming producers in other countries. In its economic stimulus package, for example, China gave more than $216 billion to subsidize green technologies – more than twice as much as the U.S. spent in the sectorand nearly half of the total “green” stimulus spent worldwide. These subsidies are helping Chinese producers ramp up production, seize market share, drive down prices, and put global competitors out of business. U.S. companies and firms have suffered the consequences as their exports are displaced, domestic market share erodes, prices plummet, and jobs are lost.Obvious translation: Sure American manufacturers received $100 billion worth of green subsidies in order to crush their foreign competitors, but China's producers received lots more, and theirs have been far more effective! No fair! In essence, the USW is openly complaining that the Chinese are better cheaters than we are, and the union thus wants the US government to call in the WTO's referees in order to stop China's cheating.
With the Airbus-Boeing WTO dispute, we are currently witnessing this kind of tit-for-tat subsidies accusation. It remains to be seen whether trade rules can resolve such issues.
