US, China Renewable Energy Trade Row Heats Up

5 December 2011

In the latest salvo in the ongoing US-China spat over renewable energy trade policies, Beijing announced on 25 November that it would be launching an investigation into Washington's support of its renewable energy sector. Meanwhile, leaders from China's biggest solar companies have publicly rejected a US trade complaint accusing China of dumping solar panels into the US market (see Bridges Trade BioRes, 17 October 2011).

Beijing's probe would cover wind energy, solar, and hydro technology products. The investigation is expected to end by 25 May 2012.

The investigation was sparked by a filing from businesses in the renewable energy industry in China. The Ministry of Commerce also stated that if violations of WTO laws were found, the government could potentially file a case at the WTO dispute settlement body.

Beijing's investigation comes quickly on the heels of Washington's own announcement in early November that it would be launching an investigation into Chinese solar subsidies and trade practices, in response to a petition filed by seven US solar manufacturers in October.

ITC rules against China

On 9 November, the US Department of Commerce had announced that it would be moving forward with its investigation into whether China's solar subsidy practices have allowed Beijing to dump solar panels into the US market. Last Friday, the US International Trade Commission (ITC) released a preliminary ruling against China. The panel's decision - which reported that China had an "inclination towards protectionism" - will allow the investigation to move forward.

The Commerce Department's action has already prompted a strong response from Chinese government officials; the Chinese Ministry of Commerce said in statements earlier this month that it is "greatly concerned" by the case, cautioning that it could hurt US-China energy co-operation and lead to a "lose-lose" situation.

Criticism over Beijing's extensive support to its clean energy producers has ramped up in recent years, with Washington critics alleging that the subsidies put foreign competitors at a disadvantage.

In October, US Trade Representative (USTR) Ron Kirk took aim at many of China's clean energy subsidies in a submission to the WTO. In the submission, Kirk identified nearly 200 subsidy programmes that Beijing has not notified to the global trade body, including Chinese policies and practices that Washington claims affected trade and investment in green technologies.

Whether Kirk's action would be followed by a dispute filing at the WTO was not made clear at the time.

Earlier this year, Beijing ended a controversial public fund for wind power manufacturing that had been the subject of a formal WTO dispute between the two countries. The US had alleged that the subsidies were prohibited for being contingent on the use of local input. While Washington hailed the Beijing decision as a victory, China argued that the subsidies had been removed because they were no longer necessary (see Bridges Trade BioRes, 13 June 2011).

Chinese solar producers push back

On 29 November, Chinese solar panel makers took a strong public stance against Washington's pursuit of the solar case, cautioning that it risked "seriously hindering the development of green energy."

Wang Guiqing, vice president of the China Chamber of Commerce, told reporters on behalf of Chinese companies that the "photovoltaic industry based in China has formed a united front to counter the US investigation."

He argued that Beijing subsidy practices were not the reason for the Chinese solar industry's success - adding that China's government support for the solar industry is lower than the support that the US and EU provide their own industries. Rather, "the competitive advantages of Chinese photovoltaic companies are due primarily to the concentration of the industrial chain inside China."

Wang's arguments were supported by the chairmen of some of China's largest solar companies; Shi Zhengrong of Suntech Power Holdings Co. told reporters yesterday that, "if you ask whether the solar industry in China has received special treatment or special support, the answer is no."

The US solar industry has struggled in recent months, with the high-profile collapse of US solar panel maker Solyndra in September dominating news headlines. Until filing for bankruptcy earlier this fall, the California-based company had been lauded in the US as an example of clean energy's potential, receiving over US$500 million in a government guarantee that it may now be unable to repay.

Quickly falling prices as a result of Chinese solar panel imports have been blamed for Solyndra's bankruptcy filing, along with the similar collapses of US companies Evergreen Solar and SpectraWatt.

The solar issue has particularly captured the attention of some US lawmakers, a few of which have already called upon the administration of US President Barack Obama to protect the solar industry and take a strong stance against so-called "unfair trade," especially in the wake of the Solyndra incident.

Sino-US talks see progress on another clean energy front

Meanwhile, the US-China Joint Commission on Commerce and Trade (JCCT), which closed talks on 21 November in Chengdu, China, saw officials from both countries make headway on another clean energy front.

The US Commerce Department, in a statement after the joint event, outlined a plan by Chinese officials to invest US$1.5 trillion over the next five years in energy-saving, alternative energy, and other emerging technologies.

After the meeting of the joint commission, which was established in 1983 as an arena for discussing Sino-US trade and investment issues, US Commerce Secretary John Bryson noted that Beijing has pledged a "level playing field" for US and other suppliers in these industries.

Beijing would be providing foreign technology suppliers with equal access to the Chinese clean energy industry, Bryson added.

After the China-US high-level meeting, the Office of the US Trade Representative (USTR) also announced that China intends to manufacture one million new energy vehicles annually by 2015 and five million annually by 2020. Furthermore, the USTR noted, Beijing has pledged that it will not - nor does it currently - maintain measures mandating the transfer of technology for these vehicles.

Foreign producers of new energy vehicles will also be "eligible on an equal basis for subsidies or other preferential policies for [new energy vehicles] with Chinese enterprises, and that these subsidies and preference programmes will be implemented in a manner consistent with WTO rules," the USTR's office explained.

ICTSD Reporting; "China solar industry rejects US anti-dumping probe," AFP, 29 November 2011; "Chinese solar companies reject US trade complaint," ASSOCIATED PRESS, 29 November 2011; "US envoy: China promises clean energy access," ASSOCIATED PRESS, 22 November 2011; "China to probe US clean energy subsidies," FINANCIAL TIMES, 25 November 2011; "Now China to probe US renewable energy support," REUTERS, 25 November 2011.

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