United States Announces Resolution of Dispute Over Chinese Wind Power Subsidies

Originally published June 8, 2011

Keywords: Chinese wind power subsidies, United States, WTO, special fund, SCM Agreement

The United States has claimed victory in its World Trade Organization (WTO) challenge to China's wind power equipment subsidies. In a June 7, 2011 announcement, US Trade Representative Ron Kirk stated that the United States had successfully challenged China's Special Fund for Wind Power Equipment Manufacturing (Special Fund) and secured China's agreement to end the program. The United States had filed a request for consultations with China on December, 22 2010, signaling a potential WTO dispute on the Special Fund. The United States and China held consultations on February 16, 2011.

Under the Special Fund, China provided monetary grants and other benefits to its domestic wind power manufacturing industry. The United States, in its December 2010 filing, claimed that the program provided subsidies and other support contingent on the use of domestic Chinese components in violation of the WTO Agreement on Subsidies and Countervailing Measures (SCM). The United States also claimed that China failed to notify the WTO of its wind power program, as required under the SCM Agreement.

The US WTO action stemmed from an investigation under Section 301 of the Trade Act of 1974. That investigation, opened October 15, 2010, was spurred by a September 10, 2010, Section 301 petition by the United Steel Worker's Union (USW). If a Section 301 investigation reveals practices allegedly inconsistent with a trade agreement, the USTR must seek formal consultations to address those practices.

The USW petition made allegations that went far beyond the particular wind power program challenged by the United States. The USW also contended that China imposed improper export restrictions on "rare earth" minerals used to produce several green technology products, including advanced batteries, solar panels, and fluorescent light bulbs. The petition further accused China of providing prohibited direct and indirect subsidies to its clean energy industry, including research and development grants, low-interest loans, and export credit guarantees. The USW also alleged that China discriminates against foreign investors through domestic content and technology transfer requirements. The United States addressed some of these additional concerns through bilateral negotiations, in which it confirmed the elimination of two other disputed subsidy programs.

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