chinese government

In a move that surprised no one, The New York Times reported today that the U.S. agreed to go ahead and formally investigate a complaint filed by the United Steelworkers in early September, accusing China of illegally subsidizing their green energy industry. The original story on the filing of the case is here. A summary of the complaint is here.

Two quotes from the summary, emphasis mine:

The USW petition details the broad range of WTO-inconsistent policies that China has employed to vault ahead of the United States as a leading producer and exporter of green technologies. These practices include discriminatory laws and regulations, technology transfer requirements, restrictions on access to critical materials, and massive subsidies that have caused serious prejudice to U.S. interests. Together, these practices have given Chinese producers an upper hand in accessing investment, technology, raw materials and markets, while foreclosing these same opportunities to U.S. producers. The Chinese government has invested hundreds of billions of dollars to unfairly advantage its producers and exporters, undercutting U.S. companies and workers and distorting billions of dollars of world trade.

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.

The USW are angry that China is subsidizing green energy MORE than the U.S. does. Their language is unclear, but they agree that the U.S. subsidizes green energy, unfortunately just not to the extent that the Chinese do. This article indicates that the stimulus package reserved $43 billion for renewable energy.

The Energy Information Administration estimated that in 2008 annual subsidies for the renewable energy industry were 4.87 billion (and this group makes a convincing case that their estimates are far lower than reality). Does the WTO account for subsidy levels versus total population? If China has four times the population of the United States, can they give a subsidy that’s larger in absolute terms but smaller in relative terms?

I am not a lawyer; it’s possible that certain types of subsidies are legal while others aren’t. Regardless, it is pretty clear that the U.S. has been on the wrong side of numerous international trade violations — and even if not wrong legally, is wrong in spirit here. See the dispute over Mexican trucks, the international gambling ban, the U.S. Brazilian cotton dispute, and many others.

Regardless of how you feel about the accusations of a weak currency (see CEI’s Fran Smith on the issue here), the U.S. cannot with a straight face accuse China of illegally subsidizing its green energy sector. Until the case is resolved, or goes away, this will be another great talking point for politicians who are more than willing to cater to protectionist fears. Nancy Pelosi has already seized the opportunity.

Finally, this is another great time to look at the mission statement of the USTR:

American trade policy works toward opening markets throughout the world to create new opportunities and higher living standards for families, farmers, manufacturers, workers, consumers, and businesses. The United States is party to numerous trade agreements with other countries, and is participating in negotiations for new trade agreements with a number of countries and regions of the world.

The Office of the U.S. Trade Representative (USTR) is responsible for developing and coordinating U.S. international trade, commodity, and direct investment policy, and overseeing negotiations with other countries. The head of USTR is the U.S. Trade Representative, a Cabinet member who serves as the president’s principal trade advisor, negotiator, and spokesperson on trade issues.

The relevant parts are the first paragraph, where they forgot to include “politically favored” when describing businesses and manufacturers (they could also delete consumers from the list and stop pretending). The relevant part of the second paragraph is where they reveal that the USTR is nothing more than a tool of the Obama administration, who has been depressingly bad on trade issues.