US Eyes Deal Outside WTO on Environmental Goods, Services

2 November 2011

The US will take advantage of several high-level meetings in Asia this month to address barriers to trade in environmental goods and services (EGS). Tensions between Washington and Beijing have been high in recent months as US lawmakers and manufacturers have increasingly sought action against China's green subsidies.

US Trade Representative (USTR) Ron Kirk told a business group last week that he would push for a voluntary tariff binding of five percent on a "basket of issues" relating to green technologies, facilitating trade between a number of nations competing for a stake in the new energy sector.

The US will raise the issue with China and other Asia-Pacific Economic Cooperation (APEC) partners at a meeting of the regional body in Honolulu next week. The US will also have the opportunity to discuss the arrangement one-on-one with China shortly after the APEC summit at the US-China Joint Commission on Commerce and Trade, and in meetings on the sidelines of APEC with eight additional members that are involved in the ongoing Trans-Pacific Partnership talks.

While Kirk says he has the support of Australia, New Zealand and others, a trade diplomat told Reuters that China prefers to leave the matter to the WTO. Keeping the negotiations in Geneva would allow China to cut a tariff deal in exchange for trade concessions from other WTO members, while also preventing the deal from moving forward on a voluntary basis. If the tariff bindings are to become WTO-enforceable, observers suggest that EGS negotiations could become far more complex.

US-China tensions over green subsidies build

The USTR announcement comes after a string of events that have placed Washington in a more confrontational stance toward Beijing, with increasing criticism of China's green subsidies by US lawmakers (see Bridges Weekly, 19 October 2011).

On 6 October, the USTR submitted to the WTO a list of nearly 200 Chinese subsidies that it claimed China had failed to announce in violation of WTO rules. On 11 October, the US Senate passed a bill that would punish China for allegedly undervaluing its currency (see Bridges Weekly, 12 October 2011). The legislation has received substantial backing from lawmakers in the US House of Representatives, but has not been put up for a House vote - largely due to opposition from that chamber's Republican leadership.

Whether or not the currency legislation would receive presidential approval even if it did pass Congress' other chamber is also largely unclear, with the administration of US President Barack Obama avoiding a definitive stance on the subject.

Most recently, on 19 October, seven US solar companies banded together in Washington to file a formal trade complaint against China, claiming it dumped solar panels in the US and has provided subsidies to solar manufacturers in violation of WTO rules.

The US Commerce Department is expected to decide whether or not to launch an investigation into China's solar practices in response to the US manufacturers' complaint on 9 November, just days before the US will meet its APEC partners in Honolulu.

The US companies allege that China used billions of dollars to subsidise its manufacturers of "crystalline silicon photovoltaic cells" - a common type of solar panel - in order to undercut US manufacturers and gain US market share. According to Reuters, they list subsidies not only in the form of direct cash payments, but also tax breaks, preferential loans, discounted raw materials, land, utilities, export assistance grants, and preferential export insurance.

The companies also allege that China dumped its panels at prices lower than what it cost to put them on the American market, contributing to the bankruptcy of three US solar firms since August. They seek restitution in the form of 100 percent tariffs on future imports of Chinese solar panels.

Two US Democratic Senators from Oregon, Ron Wyden and Jeff Merkley, strongly support the case. At a press conference announcing the complaint, they made statements accusing China of "cheating" and "rogue practices" in solar trade.

Oregon-based SolarWorld Industries America, the US arm of a German solar giant, filed the complaint at the US Department of Commerce and the US International Trade Commission last Wednesday, 26 October. Six other US companies joined SolarWorld in making the complaint, but have chosen to remain anonymous, reportedly to avoid a potential backlash in China.

The US government must legally review the case and determine whether or not to take formal action against China at the global trade body.

ICTSD reporting; "India confronts US, EU at WTO over national solar power generation programme," ECONOMIC TIMES, 26 October 2011; "US Solar Panel Makers Say China Violated Trade Rules," NEW YORK TIMES, 19 October 2011; "Chinese solar firms face growth risk after US petition," REUTERS, 20 October 2011; "U.S. eyes ‘green growth' trade deal at APEC," REUTERS, 26 October 2011.

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