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US-China Trade Relations Heats Up Over Steel

US Trade Rep, Ron Kirk

US Trade Rep, Ron Kirk

Ron Kirk, former mayor of the city of Dallas and presently the Obama administration’s US Trade Representative  filed suit against China with the World Trade Organization (WTO) this week, siding with the powerful United Steelworkers union,  accusing Beijing of illegally subsidizing the production of wind power equipment which is an anti-competitive practice under WTO rules and harmful to American  workers. The decision is the second time in less than four months that the Obama administration has lodged a legal challenge with the WTO accusing China of violating world trade protocols. This is a robust and aggressive policy posture, and represents an escalation of trade tensions between the US and China over clean energy manufacturing and so-called “Green job,” viewed by the Obama administration as an expanding frontier for good paying American jobs in which American companies are struggling to remain competitive. “Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO. rules,” Ron Kirk, the United States trade representative, said in an official statement. “These subsidies effectively operate as a barrier to U.S. exports to China. Opening markets by removing barriers to our exports is a core element of the president’s trade strategy.”  The US administration is challenging a special Chinese government fund that awards grants to makers of – that is subsidizes — wind power equipment. Kirk maintains that this Chinese government fund provides subsidies that are illegal under WTO rules because the grants appear to be contingent on manufacturers using only parts made in China – not unlike the populist ‘Made in America’ moniker.

At Stake: Good-paying American jobs

At Stake: Good-paying American jobs


China’s Ministry of Commerce issued a brief statement on its Web site early Thursday afternoon in Beijing, defending the country’s policies but providing few specifics. “Measures to develop wind energy in China are conducive to energy conservation and environmental protection as well as an important means of achieving sustainable development, and are consistent with W.T.O. rules,” the statement said.  The individual grants available under the Chinese program range from $6.7 million to $22.5 million. Chinese makers of wind turbines and associated parts can receive multiple grants as the size of the wind turbine models increases.  Total subsidies under the program since 2008 could amount to several hundred million dollars, according to the US Trade Representative’s office. The United Steelworkers, which had protested the Chinese wind power fund as part of a larger, 5,800-page trade complaint it filed with the American government on Sept. 9th of this year, said the administration’s decision was only a first step in addressing a “vast web of protectionist policies” by Beijing.  “The goal is not litigation,” Leo W. Gerard, the union’s president, said in a statement. “It’s to end their practices.” The accusations leveled this week is the first step in the WTO’s process for settling disputes. If China and the United States cannot reach a solution through consultations, the United States may request the establishment of a WTO dispute settlement panel.  Members of Congress who have been pushing for a bolder stance against China on trade, currency and other commercial matters, applauded the decision to file the case.  “The United States needs to take a more assertive approach to China’s mercantilist policies, and the administration’s action today is a welcome step in the right direction,” said Representative Sander M. Levin, a Michigan Democrat and the chairman of the House Ways and Means Committee, which oversees trade.  Senator Sherrod Brown, an Ohio Democrat, said in a statement that China was on track to make half of the world’s wind turbines and solar panels and urged the administration to make trade enforcement a priority.  “The United States cannot replace its dependence on foreign oil with a dependence on clean energy technology made in China,” he said. “American manufacturing must lead the way — and to do this, they need a level playing field.”



us-china-competing-flags-photoThe action grows out of an investigation Mr. Kirk’s office initiated on Oct. 15th growing in response to the Steelworkers’ case, which covered a range of practices in the clean-energy sector, including prohibited subsidies, export restraints and discrimination against foreign companies and imported goods.The case, known as a Section 301 complaint under the Trade Act of 1974, has been the subject of several talks between Chinese and American trade officials.  After two days of meetings last week in Washington, part of an annual forum known as the United States-China Joint Commission on Commerce and Trade, China agreed to lift one barrier to foreign developers seeking to build wind farms there. The Chinese government will allow overseas experience in wind farm development, and not just experience in China, to qualify the developers for Chinese projects.  But several other barriers remain: foreign developers are banned from offshore projects for what China describes as national security reasons, are not allowed to borrow as much money as domestic developers and are prohibited from selling carbon credits from their wind farms. Mr. Kirk said his office would continue to investigate the… Read more from Sewell Chan of the NYTs here.


Source:  NY Times, AP, BusinessWeek       Images:



Elison Elliott

Elison Elliott , a native of Belize, is a professional investment advisor for the Global Wealth and Invesment Management division of a major worldwide financial services firm. His experience in the global financial markets span over 18 years in both the public and private sectors. Elison is a graduate, cum laude, of the City College of New York (CUNY), and completed his Masters-level course requirements in the International Finance & Banking (IFB) program at Columbia University (SIPA). Elison lives in the northern suburbs of New York City. He is an avid student of sovereign risk, global economics and market trends, and enjoys writing, aviation, outdoor adventure, International travel, cultural exploration and world affairs.

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