Domestics Say Preferences and WTO Action Are Remedies for 301 Investigation on China Green Practices

While virtually all of the U.S. company comments were from the domestic, rather than importer, point of view, certain China associations also provided comments.

(See ITT’s Online Archives or 10/20/10 and 10/18/10 news, 10102014 and 10101825, for BP summaries of USTR’s launch of this investigation, which was initiated in response to a petition filed by the United Steelworkers in September 2010.²)

U.S. “Green Product” Trade Deficit with China Has Increased 1700% Since 2000

According to the Economic Policy Institute (EPI), the U.S. trade deficit with China in green industry products has increased more than 1700% in the past decade, rising from $217 million in 2000 to $4.0 billion in 2010 (estimated). The overall U.S. trade deficit with China “only” tripled in that same period.

Domestics Say China’s Practices Have Increased U.S. Imports, Limited U.S. Exports

Several comments stated that China has prioritized its green technology producers with prohibited subsidy programs that require recipients to achieve a minimum level of export performance or domestic content to benefit from the programs. These programs have helped block access for U.S. products into China while also launching Chinese producers into export markets all over the world, including the U.S.

U.S. exports are also disadvantaged by policies that require new renewable electricity generation projects to use domestic instead of imported goods, and by state-owned enterprises requiring their suppliers to shift component sourcing to China. In addition, China’s technology transfer requirements ensure that the firms who invest there not only bring investment and production, but also share their know-how.

Claim Growth in Imports & Illegal Practices Have Harmed Domestic Industry

According to the majority of the domestic industry comments, the combination of rapid growth of clean energy imports from China, the low volume of U.S. green exports to China, and the widespread evidence of illegal subsidies and other illegal trade practices strongly suggests that China has injured and continues to threaten further injury to U.S. domestic producers of green technology products.

Rare Earths Practices & Near Monopoly also Said to Hurt U.S. Manufacturers

Several also noted the negative effects of China’s rare earths policies on U.S. green industries. One stated that China’s use of export taxes and export quotas has caused major price spikes, a defacto embargo for temporary periods of time, causing damaging shipment delays and significant uncertainty regarding access to materials that are essential for numerous applications.

Others believe that China’s dominance in this market has led to a near monopoly. They cited statistics which state that 97% of the world’s rare earth oxides and nearly 100% of the world’s rare earth metals come from China.

Chinese Groups Say U.S. Chooses Not to Mine Its Rare Earths, Restricts Materials, Etc.

The China Photovoltaic Industry Alliance and other associations countered these arguments. They said that China may account for 90% of world output, but its rare earths reserves only account for 30%. They state that the U.S. is also abundant in rare earths, but has chosen not to mine it. They add that the U.S. also restricts some critical materials required by China's solar industry such as a type of quartz sand needed to produce silicon single crystal rod used in the solar photovoltaic industry.

The Chinese associations also disagreed with U.S. domestic industry claims regarding subsidy and other programs to support China’s green industry. They argued that most of the U.S. complaints are unfounded and that the U.S. also provides certain support to its green industries.

USTR Should Pursue These Issues at WTO

Virtually all of the domestic industry comments urged USTR to fully pursue at the World Trade Organization any allegations it finds have merit.

U.S. Government Should Use Domestic Steel in Its Wind, Solar Projects

One steel industry commenter suggested that the U.S. immediately institute policies which ensure that steel inputs utilized in the production of government-supported wind and solar projects are melted, formed and fabricated domestically.

USTR Should Examine Any Chinese Green Product Reexports

Another suggested that USTR examine the trade and production inter-relationships between China and other major Asian producers of photovoltaic panels and other green products, as China may be reexporting its products from these countries. The commenter gave the example of photovoltaic panels from Malaysia, whose exports jumped from less than a half million panels in 2009 to 28.6 million units in 2010. This made Malaysia the leading exporter of photovoltaic panels to the U.S. in 2010.

USTR Should Apply Findings to Other Industries

Some comments suggested that by conducting a thorough investigation of China’s green technology policies, USTR can establish the extent to which China has acted to provide its manufacturers with an international competitive advantage in ways that are directly contrary to its WTO obligations. In this way, this investigation can provide manufacturers in other sectors of the American economy with valuable information they can use to highlight China’s anticompetitive practices in their industries.

¹The International Trade Administration states that Section 301 is the principal statutory authority under which the U.S. may impose trade sanctions on foreign countries that either violate trade agreements or engage in other unfair trade practices. Section 301 proceedings can either be initiated by petition or self-initiated by USTR.

²See ITT’s Online Archives or 09/10/10 news, 10091015, for BP summary on the filing of the USW’s petition for a Section 301 investigation.

(D/N USTR-2010-0028)