The United States has made a complaint to the WTO over Chinese wind power subisides, which artificially props up their market in global competition.

The US says China is illegally subsidising the production of wind power equipment and has asked the World Trade Organisation (WTO) for talks.

It estimates China has given several hundred million dollars in questionable government grants to its companies which has distorted trade and made it tougher for American exporters […]

Its Trade Representative, Ron Kirk, said in a statement: “Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO rules.”

The announcement follows a filing in September by the United Steelworkers Union (USW) which listed a number of industries it accused China of subsidising or otherwise distorting trade from non-nationals.

Here’s the full statement from the US Trade Representative. Specifically, Ron Kirk is requesting discussions with China, but under the dispute settlement provisions set forth by the WTO.

The complaint does not include the imposition of export restrictions and tariffs on rare earth minerals, a key element of the Steelworker complaint. But it particularly targets state aid for the Chinese wind power industry. Under a Special Fund for Wind Power Manufacturing, individual Chinese companies can receive grants for up to $22.5 million dollars, and they are contingent on the manufacturers using Chinese parts and components, producing a barrier to the world market. Investigation on other parts of the Steelworkers complaint is ongoing.

This is one area where labor interests of ensuring their industries don’t get undercut by China, and the Administration’s interests in increasing exports, intersect in favorable ways. When the Steelworkers filed their claim against China for breaking global trade rules, it was unclear whether the Administration would react favorably. But by October, Ron Kirk announced an investigation into China’s greentech policies, and now, they are submitting this complaint to the WTO.

Only through actions like these will China curtail their illegal mercantilist policies. You cannot claim to support free trade and also support China’s violation of trade agreements and rules. The catch phrase “trade war” always gets applied to this, but it’s actually just the following of procedures under the terms of a contract.

Some concerns by the US over China’s wind power industry were satisfied by bilateral talks, where China agreed to allow companies with experience supplying equipment to wind power projects outside China to operate inside the country. And China terminated two other subsidy programs for their wind power manufacturing industries. But this issue of the Special Fund for Wind Power Manufacturing appears headed for litigation.

More at The Financial Times.

David Dayen

David Dayen