USTR Initiates Section 301 Investigation into China's Subsidies and Restrictive Practices on Green Technology Sector

Originally published October 18, 2010

Keywords: USTR, 1974 Trade Act, Government of China, green technology, United Steelworkers Union, World Trade Organisation,

The Office of the US Trade Representative (USTR) announced on October 15, 2010, that it has launched an investigation under Section 301 of the 1974 Trade Act to probe certain acts, policies and practices of the Government of China affecting trade and investment in the green technology sector. The USTR stated that they are going to thoroughly examine and verify the United Steelworkers Union's (USW) claims, and noted that "[f]or those allegations that are supported by sufficient evidence and that can effectively be addressed through WTO dispute settlement, we will vigorously pursue the enforcement of our rights through WTO litigation."

The investigation was instituted in response to a petition filed by the USW on September 9, 2010. The USW petition contends that certain policies and practices adopted by China to stimulate and protect its clean energy industry are inconsistent with its World Trade Organization (WTO) obligations, and that these policies and practices have enabled China to emerge as a dominant supplier of wind and solar energy products, advanced batteries, and energy-efficient vehicles.

The USW petition asserts that China violates its WTO commitments by:

Restricting access to critical raw materials (i.e., "rare earth" materials); Granting subsidies to Chinese manufacturers that are WTO-inconsistent because they are contingent upon either export performance or the use of domestic content; Granting other trade-distorting subsidies to Chinese manufacturers that injure foreign competitors; Imposing regulations that discriminate against imported goods and foreign investors; and Imposing technology transfer requirements on foreign investors. Among the various accusations made, the USW contends that China violates its WTO commitments by imposing export restrictions on "rare earth" minerals that are used to produce several green technology products, including advanced batteries, solar panels, and fluorescent light bulbs. According to the petition, China is also ignoring its WTO commitments by granting its clean energy industry a number of direct and indirect subsidies, including R&D grants, low-interest loans, and export credit guarantees. Further, the USW alleges that China employs discriminatory practices by imposing domestic content and technology transfer requirements on...