China agrees to halt subsidies to wind power firms

WASHINGTON/HONG KONG Tue Jun 7, 2011 10:41am EDT

A wind turbine is seen near a gate of the ancient city of Wushu in Diaobingshan, Liaoning province January 18, 2011. REUTERS/Sheng Li

A wind turbine is seen near a gate of the ancient city of Wushu in Diaobingshan, Liaoning province January 18, 2011.

Credit: Reuters/Sheng Li

WASHINGTON/HONG KONG (Reuters) - China has settled a green technology trade dispute with the United States by agreeing to stop subsidizing wind power firms that use domestic parts at the expense of imports, U.S. Trade Representative Ron Kirk said on Tuesday.

"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," Kirk said in a statement.

The decision is a victory for the United Steelworkers union, which last year urged President Barack Obama's administration to challenge a number of Chinese clean energy measures that it said violated World Trade Organization rules.

"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," Kirk said.

China's ministry of commerce could not be reached for comment.

USTR said the subsidies took the form of grants to Chinese wind turbine makers that agreed to use key parts and components made in China rather than buying imports. Individual grants since 2008 ranged from $6.7 million to $22.5 million and could collectively total several hundred million dollars, it said.

The agreement comes as the Obama administration is struggling with high unemployment and concern about the ability of the U.S. economy to generate enough new jobs.

Obama has highlighted green technologies such as wind power as a promising source of job creation.

THIRD U.S. VICTORY

The case marked the third successful U.S. challenge against Chinese subsidy programs at the WTO. Each was resolved through consultations rather than a ruling from a WTO dispute settlement panel that can takes years to obtain.

But Kirk chided China for failing to meet a WTO obligation to provide information on a regular basis about its subsidy programs.

"China is the second largest trader at the WTO, and it is simply not acceptable that China continues to evade its transparency commitments," he said.

While the United States applauded China's decision to halt subsidies to wind power firms, the move is unlikely to prevent China's biggest power producers from moving ahead with plans to expand internationally.

"Chinese wind power companies have reached a stage that, regardless of subsidies, they will head out and aim for overseas markets if there are opportunities," said Dennis Lam, an analyst with DBS Vickers.

China's largest wind turbine makers Sinovel Wind Group Co and Xinjiang Goldwind Science and Technology -- also among the world's biggest wind turbine makers -- have announced plans to supply markets overseas.

Goldwind established a wholly owned U.S. unit in Chicago last year, marking its ambition to serve American markets.

Analysts and industry executives in China said any announcement on halting subsidies to wind firms is unlikely to change an overall policy of strengthening the industry.

"I wouldn't think this to be a major policy shift on the part of China. From the outset, the issue was more symbolic and more of a political gesture," said a senior executive at Suzlon Energy's China unit.

"Removing one or part of the subsidies offered manufacturers won't mean a strategic shift from the overall policy framework."

China has said its new five-year plan for renewable energy will include pledges to boost wind power capacity. The country has built the most wind power capacity in 2010, adding 18.9 gigawatts and bringing its total capacity to 44.7 GW, according to Global Wind Energy Council.

In 2010, China overtook the United States as the country with the most installed wind energy capacity.

(Additional reporting by Michael Martina in Beijing; Editing by Jacqueline Wong and John O'Callaghan)

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