U.S. challenges China wind power aid at WTO

WASHINGTON Wed Dec 22, 2010 5:45pm EST

A general view shows the Tazigou wind power station in Fuxin, Liaoning province November 21, 2009. REUTERS/Stringer

A general view shows the Tazigou wind power station in Fuxin, Liaoning province November 21, 2009.

Credit: Reuters/Stringer

WASHINGTON (Reuters) - The United States on Wednesday accused China of illegally subsidizing the production of wind power equipment and asked for talks at the World Trade Organization, the first step in filing a trade case.

U.S. trade officials said they were concerned Chinese manufacturers of wind turbines and related parts and components could have received several hundred million dollars in questionable government grants in 2008 under China's Special Fund for Wind Power Manufacturing.

They said the grants appeared to violate WTO rules by requiring Chinese manufacturers to use only Chinese-made parts and components.

"Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO rules," U.S. Trade Representative Ron Kirk said in a statement. "These subsidies effectively operate as a barrier to U.S. exports to China.

U.S. wind turbine manufacturers such as General Electric and United Technologies are eager to compete in China's fast-growing market, although the United Steelworkers union was the driving force behind the case.

The decision comes about a month before Chinese President Hu Jintao goes to Washington for talks with President Barack Obama that are expected to touch on how the two countries can cooperate to create clean energy jobs.

Some U.S. lawmakers worry China is not prepared to play fair in the sector.

"The United States cannot replace its dependence on foreign oil with a dependence on clean energy technology made in China," said Senator Sherrod Brown. "American manufacturing must lead the way and to do this, they need a level playing field."

By asking for WTO talks, the United States begins a 60-day period for the two countries to resolve the disagreement through consultation. If those efforts fail, the United States could ask for a WTO dispute settlement panel to hear its complaint.

The steelworkers union filed a petition in September, accusing Beijing of a long list of subsidies and other policies to favor production of clean energy technologies in China at the expense of the United States and other countries.

Kirk said his office would continue to investigate many of the allegations raised in the steelworkers' petition, and could bring additional cases at the WTO.

One high-profile issue still being examined by the U.S. trade representative's office is a complaint about China's restrictions on exports of rare earth minerals used in production of wind turbines, electric vehicles, solar cells and energy efficient lighting.

RARE EARTH MATERIALS

"We are very concerned about China's export restraints on rare earth materials, antimony and tungsten" and could still file a case, U.S. trade representative spokeswoman Nefeterius McPherson said.

"We have raised our concerns with the Chinese and we are continuing to work closely on the issue with stakeholders."

Kirk's office also said it had made progress on some of the steelworkers' concerns during the U.S.-China Joint Commission on Commerce and Trade meeting last week in Washington.

Beijing agreed to no longer require foreign companies bidding for large-scale wind power projects in China to have prior experience in China, the U.S. trade office said.

China also recommitted to eliminating discriminatory local content requirements in wind manufacturing and informed the United States that two other subsidy programs challenged by the steelworkers union had been eliminated, Kirk's office said.

Steelworkers President Leo Gerard acknowledged progress was made in the recent U.S.-China talks and said the steelworkers were satisfied with the administration's approach.

"From day one, the USW knew that the complexity and enormity of the case and the lack of transparency in the Chinese system would require that we be in this for the long haul ... The goal is not litigation; it's to end their practices," Gerard said.

Representative Sander Levin, a senior Democrat, said the inability of U.S. Trade Representative's office to fully investigate all of the union's charges in the time allotted under U.S. law showed it "lacks sufficient tools and resources to quickly and effectively address the full range of China's trade-distorting policies."

(Reporting by Doug Palmer; Editing by Sandra Maler, Jackie Frank and Bill Trott)

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