The United Steelworkers union filed a legal case with the Obama administration Thursday morning, accusing China of violating World Trade Organization rules by subsidizing exports of clean energy equipment to the United States.An executive summary of the USW's big petition is available on its website here. As the NYT article makes clear, this is a pretty complex political and legal issue that requires far more than a Thursday-night blog post (especially with the NFL regular season kicking off in about an hour!). So while I'm sure I'll have far more to say on this later, here are a few initial thoughts to tide you over.
The filing, more than 5,000 pages long and 18 inches thick, contends that the central government in Beijing and China’s provincial governments have used land grants, low-interest loans and dozens of other measures that violate W.T.O. rules.
Leo W. Gerard, president of the 850,000-member union, said in a conference call with reporters after the filing that China’s violations of free-trade rules had helped Chinese companies expand their share of the world market for wind turbines, solar panels, nuclear power plants and other clean energy equipment, at the expense of jobs in the United States and elsewhere.
The filing asks the Office of the United States Trade Representative to begin formal consultations with China, which would lead to proceedings at the W.T.O. in Geneva if Beijing did not agree to repeal the subsidies....
Nefeterius A. McPherson, a spokeswoman for the Office of the United States Trade Representative, said that the office had accepted the union’s petition and would reach a decision on whether to open an investigation of Chinese trade practices within 45 days. That is the maximum amount of time allowed under the obscure provision invoked by the union in its filing, Section 301 of the 1974 trade law....
With clean energy a stated priority of the Obama administration, as a jobs generator and for environmental reasons, the union says it hopes to gain support for its case by injecting the trade issue into the autumn Congressional campaigns....
The filing of the trade case comes as trade and currency frictions with China are mounting. Friday morning in Beijing (late Thursday night in New York) China is expected to announce that in August it ran another especially large trade surplus, possibly exceeding $25 billion.
President Obama imposed steep tariffs a year ago on tire imports from China, a decision that China is itself now challenging before a W.T.O. panel, which is expected to give an initial ruling this month. The Commerce Department has separately granted dozens of requests to impose tariffs on very narrow categories of imports from China, like steel wire strands for prestressed concrete, after finding evidence that they were subsidized, or dumped, in the American market.
But special tariffs and other import restrictions still cover less than 3 percent of American imports from China. Unions and many Congressional Democrats have contended that the administration should be more assertive in forcing China to honor previous free-trade commitments. But the United States government has long depended on companies to gather commercial information for trade cases, which companies have been hesitant to do.
China’s manufacture of solar panels, wind power turbines and other clean energy products — with the strong support of its government, through land grants and low-interest loans — has turned that nation into the global leader in those markets. China has more than one million jobs in all clean energy industries combined.
Meanwhile, American and other Western manufacturers of solar and wind power equipment have struggled to compete. Some American clean energy companies have scaled back production and laid off workers, while moving operations to China.
Mr. Obama called in his State of the Union address in January for the United States to become a leader in green energy instead of ceding the industry to foreign competitors, including China. But China continues to gain market share in practically every category of clean energy technologies, including solar panels and high-speed trains....
The United Steelworkers union represents employees in a wide range of energy-related jobs, including manufacturers who make the steel for wind turbine towers and nuclear reactors, and glassworkers who make solar panels and various kinds of incandescent and halogen light bulbs. The union also represents workers involved in the assembly of wind turbine towers and those who make gears, valves, engines and other components of clean energy equipment. All those job categories have faced increased competition from China and other countries in recent years.
Another big American union, the International Brotherhood of Electrical Workers, with more than 700,000 members, is also involved in the installation of many clean energy systems, although the steelworkers’ union has not invited it or other unions to participate in the case....
Besides Chinese government assistance to clean energy exporters in the form of free or discounted land for manufacturing plants and low-cost loans, the steelworkers’ union says China has broken W.T.O. rules by tightly restricting the export of so-called rare earth elements needed for the manufacture of wind turbines, solar panels and energy-saving compact fluorescent bulbs.
The filing also accuses the Chinese government of forcing foreign clean energy companies to license their technology to local partners as a condition of entry to the Chinese market....
In the United States, the solar industry has been largely quiet on trade actions and has not retained a law firm to advise it on the feasibility of a trade case.
So while there have been months of back-channel discussions in the United States among lawyers, administration officials and corporate executives about China’s clean energy policies, those discussions have not led to the filing of any trade cases.
Section 301 of the 1974 trade law, the provision cited by the steelworkers’ union, gives legal standing to unions as well as corporations to file trade cases. The law provided the legal basis for threats of unilateral American trade restrictions in many confrontations with Japan and South Korea through the 1980s and early 1990s....
(1) I must admit that I'm at a loss as to what the USW is really getting for its
(2) As the NYT states, the USW petition claims that Chinese subsidies have crippled American producers of several products, including light bulbs. I guess the unions and their lawyers weren't expecting a front-page article in yesterday's Washington Post which essentially demonstrated that (i) US environmental regulations, not unfair Chinese trade practices, have killed the American incandescent lightbulb industry; and (ii) Chinese long-term investment and low labor costs, not subsidies, are the biggest reasons for China's success in the compact flourescent light (CFL) business. Talk about bad timing!
(3) It's no secret to readers of this blog that the USW complaint reeks of hypocrisy, as the Obama administration has already thrown billions of taxpayer dollars at green manufacturers over the last 21 months in an attempt to make them globally competitive. And it wouldn't be surprising at all for USTR to bring a WTO case against China's green subsidies, despite the fact that the US government's hands are also deep into the (green) cookie jar. 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 sector and 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.
Talk about chutzpah.
Exit question: if USTR ends up filing a WTO dispute on the USW's grounds, does that mean we'll have our first ever official case of "subsidy envy"?
(Cheesy answer: well, they don't call them "green" products for nuthin'!)