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US alleges China violates trade rules

By Keith Bradsher
New York Times / October 7, 2011

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WASHINGTON - Under pressure from Congress to do more to confront China on economic issues, the Obama administration has notified the World Trade Organization of nearly 200 Chinese subsidy programs, saying many of them may violate free trade rules.

Ron Kirk, the US trade representative, said in a statement yesterday that many of the subsidies had been identified in a yearlong US inquiry into how the Chinese government helped bankroll the rapid growth of its clean-energy industries. In solar and wind power, in particular, US companies have had trouble keeping up with Chinese competitors.

The action by Kirk’s office comes as the Senate is considering a bill challenging China’s manipulation of its currency as a trade tool. The Chinese government strongly condemned that bill, and House Republicans and the White House have also expressed reservations.

But with the trade representative’s long list of ways that China subsidizes its domestic industries, the Obama administration is now taking a more head-on approach to Chinese trade. Whether or not any of those subsidies violate international trade rules, the US trade office says China is already out of bounds by not having reported them to the WTO. The WTO requires member countries to disclose details of their subsidies every two years. But China has disclosed its subsidies only once since it joined the WTO in 2001.

The goal of requiring the reports was to help other countries study the subsidies and determine whether any of them violated trade rules that prohibit using government money either to help companies buy market share in other countries or to discourage imports.

The only time China filed a report was in 2006, and it was a short list that included only subsidies at the national level - not China’s numerous provincial or municipal subsidies.

Notifying the WTO about China’s undisclosed subsidies would not set off any automatic moves to consider sanctions. In fact, China already agreed in recent years to repeal or let lapse about half of the subsidies on the administration’s list in efforts to resolve parts of other trade disputes.

But of the subsidies still in place, about half have been identified as part of a yearlong US investigation into how the Chinese government has helped bankroll the rapid growth of its clean-energy industries.

Through various types of support, China has helped transform its wind turbine and solar panel manufacturers from also-rans into the world’s dominant producers in just five years. The US solar panel industry has been crumbling in the face of plunging prices forced by Chinese exports, with three companies - Solyndra, Evergreeen Solar, and SpectraWatt - filing for bankruptcy in August alone.

Commerce ministry officials in China have repeatedly denied that the country’s subsidies for clean-energy industries violated WTO rules. The commerce ministry was closed this week for national holidays.

In examining China’s clean-energy subsidies over the last year, the Obama administration has already filed one complaint to the WTO. That filing involved a subsidy by Beijing of $6.7 million to $22.5 million for each wind turbine manufacturer that used parts made in China instead of imported parts. China agreed last June to revoke the subsidy.