U.S. Trade Representative

“Illegal” Green Energy Subsidies

by Brian McGraw on October 15, 2010

in Energy, Trade

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.

Policymakers’ letter asks tough questions re carbon tariffs

by Fran Smith on March 27, 2009

in Economy, Energy, Environment, Global Warming, International, Trade

Yesterday Ranking Members of both two House committees and two subcommittees wrote to the new U.S. Trade Representative Ron Kirk and asked him to clarify the Administration’s position on the issue of carbon tariffs.  The letter was sparked by recent remarks of Energy Secretary Steven Chu that the U.S. was considering levying tariffs against countries that haven’t taken steps to reduce carbon emissions.

In their letter Congressmen Joe Barton, Ralph Hall, Greg Walden, and Paul Brown cautioned:

Any emissions-related trade policy will be extremely complicated.  Careful consideration of the pros and cons — and legality — of any such policy is critical.  Poor decisions can lead to destructive trade wars that could put tens of thousands of U.S. workers out of a job, and severely harm our economy.

As Congress moves on proposals for mandated reductions in carbon emissions — such as a cap-and-trade scheme — the notion is gaining that “something has to be done,” such as carbon tariffs, so that the U.S. can compete with countries that haven’t committed to emission reductions.  The Republican lawmakers — all on committees that have some jurisdiction on global warming issues — presented a list of hard and focused questions to USTR Kirk on what the Administration is planning and whether some of the serious downside risks of border measures have been considered. (The congressmen are Ranking Members on the Committee on Energy and Commerce and its Subcommittee on Oversight and Investigations and the Committee on Science and Technology and its Subcommittee on Investigations and Oversight.)

The letter is a formal request, and the USTR is obligated to respond to the policymakers’ questions.  Maybe this will take some of the wind out of the carbon tariff sails, especially since climate negotiators from nearly 190 countries will be meeting in Bonn, Germany starting March 29 to come up with concrete plans for what they hope will be an agreement in December.

So, in the midst of a deep worldwide recession, countries will be planning to make energy less affordable, to force some major emitters out of business, and maybe start a trade war over border tariffs.  Don’t we already have enough economic problems to contend with?

(Hat-tip: Iain Murray)

Ron Kirk’s Texas origins may temper trade stance

by Fran Smith on December 19, 2008 · 2 comments

in International, Trade

Selecting former Dallas mayor Ron Kirk as the nominee for U.S. Trade Representative sends a signal that perhaps President-elect Obama will temper his anti-trade stance in the face of real-world economics. Kirk, a two-term elected mayor of Dallas, doesn’t have much trade experience, but he is a native of the U.S.’s largest exporting state, with Mexico and Canada — those nasty NAFTA partners — as Texas’ major export destinations.

The nominee for one of Obama’s Cabinet positions holds a law degree from University of Texas School of Law and early on in his career worked for Senator Lloyd Bentsen both in his Senate office and when Bentsen was appointed Treasury Secretary by President Clinton.

Kirk served as Texas’ Secretary of State for one year, before running for mayor of Dallas and winning the election. He was reelected by a large majority in 1999, but left after two years to run unsuccessfully for Sen. Phil Gramm’s vacated Senate seat. He is now a partner in the law firm Vinson and Elkins.

What might provide perspective to Kirk’s trade stance is that he comes from a state that has been a powerhouse in exports. State figures show that exports totaled $168.16 billion in 2007. According to a Dallas Fed report,

Compared with the nation, Texas exports a larger share of its output, depends on exports for more of its jobs, sends more sophisticated products overseas and employs higher-skilled workers in export-related jobs. The state has been instrumental in the surge of overall U.S. trade; its port activity has grown more than twice as fast as the nation’s in the past decade.

Although Texas is an export leader, the report noted that state should be more diversified in both its export markets and the goods and services it provides to foreign markets.

The Texas job situation is also buoyed by its exports. Government figures show that 5.5 percent of all non-government jobs in the state are export-related, and 20 percent of Texas’ manufacturing jobs depend on exports, compared to 17 percent for the nation.

With these and other data demonstrating the economic and employment benefits of trade, one would hope that the in-coming U.S. Trade Representative won’t be too anxious to embrace protectionist policies that might stifle more open trade and economic growth.

The Richardson appointment was nice, but…

by Ivan Osorio on December 3, 2008 · 2 comments

in Economy, Trade

When was the last time the U.S.’s top trade official wasn’t a strong advocate for free trade? It may happen in the new Obama Administration.

According to numerous news reports, President-elect Obama has offered the post of USTR to Rep. Xavier Becerra (D-Calif.), a 16-year member of the House, who serves on the powerful Ways and Means Committee that oversees trade and is a close ally of Speaker Nancy Pelosi — his website lists him as “Assistant to the Speaker.”

Becerra’s record on supporting free trade is a mixed bag. He voted to hold up the Colombia Free Trade Agreement. He voted for the Peru free trade agreement, but against the Oman FTA and the Central America-DR FTA. He is a strong proponent of including non-trade issues in trade agreements, particularly labor and environmental provisions that could act as protectionist trade barriers by forcing poor countries to adopt rich countries’ standards.

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