China Ends Subsidies for Domestic Wind Equipment Makers after U.S. Files WTO Complaint

China has formally revoked grants to Chinese wind turbine manufacturers that agreed to use key parts and components made in China rather than purchasing imports after the U.S. filed a complaint with the World Trade Organization (WTO), saying the subsidies were prohibited under international trade rules. The U.S. took action after the United Steelworkers (USW) last September filed a trade case alleging that China used “protectionist and predatory” practices to develop its renewable sector at the expense of production and job creation in the U.S.

The Office of the U.S. Trade Representative, which announced that China had ended the wind power equipment subsidies on Tuesday, claimed that grants provided to Chinese companies since 2008 under China’s Special Fund for Wind Power Equipment Manufacturing (Special Fund) subsidies could have totaled “several hundred million dollars.” The size of individual grants ranged between “$6.7 million and $22.5 million,” it said.

“Subsidies requiring the use of local content are particularly harmful and are expressly prohibited under WTO rules,” said U.S. Trade Representative Ambassador Ron Kirk in a statement on Tuesday. “We challenged these subsidies so that American manufacturers can produce wind turbine components here in the United States and sell them in China.”

The Trade Representative’s Office said that “China’s inadequate transparency” had forced the U.S. to conduct “significant investigatory efforts” to uncover the subsidies challenged—even though under WTO rules, China was obliged to submit information about all of its subsidy programs on a regular basis. “This information is required of all WTO Members so that countries may assess the nature and extent of subsidy programs,” the office said.

The federal body claimed that China “never” notified the WTO of the wind power equipment subsidies challenged—further alleging that China has failed to submit notifications about “dozens of subsidies challenged” in two prior disputes regarding subsidies not specific to energy. “In fact, China has submitted only one subsidies notification since becoming a WTO Member in December 2001. That notification took place more than five years ago and was noticeably incomplete,” the government said.

“The United States would prefer not to resort to WTO challenges but we will do so to hold China accountable and to enforce the rules on illegal subsidies. Even as we announce our success in this dispute, it is past time for China to be transparent about its subsidy programs, and that includes meeting its notification obligations like other WTO Members. China is the second largest trader at the WTO, and it is simply not acceptable that China continues to evade its transparency commitments,” Kirk said.

The WTO dispute was initiated after the government launched an investigation prompted by a 5,800-page trade case filed by the USW—the largest industrial union in North America in September. That complaint cited five broad areas in which China’s policies went against WTO rules, ranging from export restrictions on rare-earth elements to technology transfer. It also cited unfair subsidies—asserting that China rigs bidding processes for wind power projects by forcing consideration of “local content”—and financing arrangements for Chinese exporters.

The government’s success was “good news for … U.S. companies and American workers,” but it needs to be “followed up with continued vigilance, to ensure the Chinese keep their commitments,” warned Leo W. Gerard, president of the USW, in a statement on Tuesday.

The Trade Representative’s Office said that the U.S. had previously ended “similarly problematic subsidies” in two other WTO disputes against China. In 2007, the U.S. and Mexico challenged several tax-related subsidies that benefited a wide cross-section of China’s manufactured goods, claiming that those subsidies illegally supported Chinese-made goods and discouraged the purchase of imports from the U.S. Later, in 2008, the U.S., Mexico and Guatemala challenged as illegal a Chinese government industrial policy that generated a vast number of subsidy programs that promoted worldwide sales of famous Chinese brands.

Sources: POWERnews, U.S. Trade Representative’s Office, USW