Along December 2010 and a few weeks before the official visit of President Hu Jintao to the United States on 19 January, clean energy technologies have been raised several times as a core trade issue between the two countries. The most dramatic event was the complaint made by the U.S. government against China's subsidies to wind energy technologies. The most positive aspects of the bilateral trade negotiations relates to smart grid technologies.
Wind Power Equipments: The United States contests the legality of China's subsidies to wind energy technologies under WTO rules
On 22 December, the United States came with a new claim against China's subidy policy in favour of its national wind energy industry. The U.S. government accuses China of subsidising manufacturers of wind turbines equipments and related components in a manner that goes against WTO rules. Chinese manufaturers would have benefited from government grants since 2008 under the national Special Fund for Wind Power Manufacturing (between $6.7 million and $22.5 million of individual grants). The grants awarded under the Special Fund seem to be contingent on Chinese manufacturers using parts and components made in China. By this way, Chinese manufacturers would have been required to only use Chinese-made parts and components. For the U.S. government, this amounts to import substitution subsidies prohibited under the WTO rules, hindering foreign exports to China. The US government has also raised claims as China's failure to comply with the notification procedures under the Agreement on Subsidies and Countervailing Measures (SCM Agreement), and the absence of translation available in one of the language of the WTO. If the two governments do not find an agreement through the consultation procedure within two months, a formal dispute settlement procedure can be open before the WTO. (See summary of claims by U.S. Trade Representative Office, USTR.)
The case builds on a petition filed by the United Steelworkers union (USW) in September 2010 in the U.S. and a follow-up investigation by U.S. trade office launched in October (See USW press release). It also adds to previous claims of illegal barriers to trade made by the U.S. against China's restrictions on exports of rare earth minerals used in the production of wind turbines, electric vehicles, solar panel cells and energy efficient lighting.
The Chinese wind energy sector is recognised to be one of the fastest growing ones, and the U.S. officials expect the market to attain $100 billion by 2020. Meanwhile, international partners do not want to miss trade opportunities with reverse consequences for their own clean energy market. Summarising U.S. fears, U.S. Senator Sherrod Brown said lately: "The United States cannot replace its dependence on foreign oil with a dependence on clean energy technology made in China."
Smart Grid: Positive Trade Negotiation Results on Smart Grid Technologies
Just a few days before the official claims made by the U.S., representatives from the two governments met in Washington DC for the 21st annual U.S.-China Joint Commission on Commerce and Trade (JCCT) (picture) (15 December 2010). Among the notable results of the JCCT counts the commitment made by China on intellectural property rights enforcement. Another key result is the commitment to not discriminate in government procurement decisions based on the origin of the intellectual property component of the products imported; this goes together with China's commitment to rapidly adhere to the WTO's Government Procurement Agreement.
Smart grid technologies were discussed along the JCCT. According to U.S. figures, China is planning to invest $10 billion per year along the period 2011-2020 in order to build its national smart grid. It will also invest $590 billion in the development of its electric power grid. This makes China's electric infrastructures an attractive market where standards development, technical regulations and conformity assessment procedures will become key criteria for imports. The U.S. government was satisfied from the "pledge" made by China "to adhere to openness, non-discrimination, and transparency in its smart grid market, and to cooperate with the United States on smart grid standards," for a market estimated at $600 billion (quotes by U.S. Secretary of Commerce G. Locke). Compliance with WTO TBT Agreement rules will be instrumental here. China announced a collaboration with the U.S. National Institute of Standards and Technology in the development of smart grid standards. It also committed that "all enterprises in China, including state-owned enterprises and state-invested enterprises, will make purchases and sales based solely on commercial considerations" providing "equal treatment to foreign, foreign-invested, and Chinese domestic enterprises." The U.S. obtained another commitment from China on technology neutrality for 3G and future technologies, ensure a better market access for U.S. technologies. The U.S. Trade Development Agency signed grants for State Grid Smart Grid Standards Development.
The JCCT also discussed wind energy equipment trade on the background of the previous claims reported above. However, the results appear much more limited, with some "confirmations" made by China as regards:
- the recognition of the experience of foreign companies outside China for the purposes of meeting experience requirements to supply equipment for large scale wind power projects;
- the possible submission by foreign companies of documentation based on existing installed wind power projects overseas in order to demonstrate technical requirements for eligibility to supply Chinese large-scale wind power projects.
Finally, the U.S. government obtained from China the confirmation that two subsidy programmes mentioned in the petition filed by the USW union had ended, namely the Export Research and Development Fund, and the Ride the Wind programme. Those two programmes are supposed to have also granted prohibited subsidies to national manufacturers and to have discriminated against foreign imports into China.
References:
- US Department of Commerce website;
- 21st U.S.-China Joint Commission on Commerce and Trade (press release and fact sheet);
- Summary of U.S. claims in NY Times and presentation of previous clean energy trade issues in another NY Times article.
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