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United Steelworkers File Claim Against China for Breaking Trade Rules

The New York Times reported this morning on Chinese malfeasance to expand their portion of the global clean energy market:

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.

Heavily subsidized land and loans for an exporter like Sunzone are the rule, not the exception, for clean energy businesses in Changsha and across China, Chinese executives said in interviews over the last three months.

But this kind of help violates World Trade Organization rules banning virtually all subsidies to exporters, and could be successfully challenged at the agency’s tribunals in Geneva, said Charlene Barshefsky, who was the United States trade representative during the second Clinton administration and negotiated the terms of China’s entry to the organization in 2001.

I’m all for clean energy, and viewed in one light, these policies sound downright sensible. But China is simply violating the rules designed to create a level playing field in global trade. Pointing that out doesn’t make anyone a protectionist.

The United Steelworkers Union has responded to this by filing a trade claim against China, under Section 301 of the Trade Act of 1974. Basically, any member nation of the WTO can put a claim in on policies that violate the agreements. The USW action gives the Obama Administration 45 days to decide to investigate their claim and start talks between them, the WTO and the Chinese government. In a statement, Scott Paul of the Alliance for American Manufacturing said that China’s policies “are limiting opportunities for domestic growth in clean energy manufacturing and denying our exporters of clean energy technology and equipment the opportunity to compete on a level playing field in China’s market and in markets where we compete with Chinese goods.”

Senator Sherrod Brown (D-OH) threw his weight behind the USW claim, reflecting on the passage of permanent normal trade relations with China, and how the idea at the time was that this would force the country to play by certain global rules.

“There is nothing normal or fair about the way China trades. If we are going to compete in the global clean energy manufacturing industry, we need strong trade enforcement. Every day we delay enforcing trade rules, China spends $51 million a day to speed past us in the race to lead the world in clean energy manufacturing, while elbowing competition out of the way through unfair subsidies and discriminatory tactics.

“I applaud the United Steelworkers for filing this petition, and urge the Administration to work without delay alongside workers and businesses to challenge China’s trade practices at the WTO. Clean energy represents the future of manufacturing. Acting now means that we won’t displace America’s dependence on foreign oil for a dependence on Chinese-made clean energy technology.”

Brown has been carrying legislation that would require the Obama Administration to take action against trade violators like China.

I’m sure free trade types, as well as the businesses who make the decisions to offshore their production components to China, will find a way to cry foul at the USW action, but all it is asking for is a world in which every country adheres to a simple set of rules, and where no country can be allowed to violate them with mercantilist policies without proper sanctions. At a time when American jobs are scarce, even in manufacturing, allowing this behavior to continue is a kind of economic suicide.

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David Dayen

David Dayen

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