China Ends Wind Power Equipment Subsidies Challenged by the United States in WTO Dispute
Washington, D.C. − U.S. Trade Representative Ron Kirk announced today that China has ended certain wind power equipment subsidies. The United States had challenged the Special Fund for Wind Power Equipment Manufacturing (Special Fund) subsidies at the World Trade Organization (WTO) following an investigation initiated in response to a petition filed by the United Steelworkers (USW). The subsidies took the form of grants to Chinese wind turbine manufacturers that agreed to use key parts and components made in China rather than purchasing imports. The United States estimated that the grants provided to Chinese companies since 2008 could have totaled several hundred million dollars. The size of the individual grants ranged between $6.7 million and $22.5 million.
“The United States is pleased that China has shut down this subsidy program. Subsidies requiring the use of local content are particularly harmful and are expressly prohibited under WTO rules. This outcome helps ensure fairness for American clean technology innovators and workers. We challenged these subsidies so that American manufacturers can produce wind turbine components here in the United States and sell them in China. That supports well-paying jobs here at home,” said Ambassador Kirk.
This is the third successful WTO challenge that the United States has brought against Chinese government subsidies. In each of these cases, following formal consultations at the WTO, China agreed to eliminate the subsidies that the United States had challenged.
Because of China’s inadequate transparency, it has taken significant investigatory efforts by the United States Government, working with industry and workers, to uncover the subsidies that the USTR has successfully challenged at the WTO. Under WTO rules, China is obligated 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. Despite this obligation, China never notified the WTO of the wind power equipment subsidies challenged in this WTO dispute. Similarly, China failed to submit notifications about dozens of subsidies challenged in the two prior disputes. 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 obligations of WTO Members to submit notifications about their subsidies are set forth in Article 25 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement.)
“This lack of transparency hinders the efforts of WTO Members to collectively ensure that each government is playing by the rules. 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,” Ambassador Kirk said.
The United States’ WTO dispute challenging the Special Fund subsidies was initiated as a result of an investigation launched by USTR in response to a petition the United Steelworkers (USW) filed under section 301 of the Trade Act of 1974, as amended. The investigation was initiated on October 15, 2010. It probed allegations relating to a variety of Chinese policies and practices affecting trade and investment in the clean energy technology sector, including subsides.
The United States held WTO consultations with China on February 16, 2011. In those consultations, the United States made clear its view that the subsidies provided to Chinese wind turbine manufacturers under the Special Fund program were prohibited because they were conditioned on the use of domestic over imported goods. (See Article 3 of the WTO SCM Agreement). Following those consultations, China took action formally revoking the legal measure that had created the Special Fund program.
The United States has succeeded in ending similarly problematic subsidies in two other WTO disputes against China. In 2007, the United States 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 United States. In 2008, the United States, 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.