Saturday, October 16, 2010

Obama Administration to Investigate Chinese Subsidies to Alternative Energy Companies

Put together the paperwork, we've got a case - and from what I've been reading, this is just one of the many areas we need to tackle when it comes to creating fair trade with China. Step one is underway...

The Obama administration is launching a broad investigation into whether the Chinese government improperly supports its alternative energy companies, one of the sharpest challenges yet to Beijing's alleged efforts to seize world leadership in particular industries.

U.S. Trade Representative Ron Kirk announced on Friday he had accepted a petition from the United Steelworkers union contending that the subsidies and other benefits China grants to its clean-energy companies violate World Trade Organization rules.

"We take the USW's claims very seriously, and we are vigorously investigating them," Kirk said in a prepared release. "Green technology will be an engine for the jobs of the future, and this administration is committed to ensuring a level playing field for American workers."

The administration has 90 days to research the union's claims and decide whether to advance the case with a formal complaint to the WTO.

The NY Times has details on how the subsidies may be a violation in the eyes of the WTO. One example is Hunan Sunzone Optoelectronics, a two-year-old company, now exporting 95% of its solar panels to Europe - and planning on opening three offices in the US next year to push into our market.

To help Sunzone, the municipal government transferred to the company 22 acres of valuable urban land close to downtown at a bargain-basement price. That reduced the company’s costs and greatly increased its worth and attractiveness to investors.

Meanwhile, a state bank is preparing to lend to the company at a low interest rate, and the provincial government is sweetening the deal by reimbursing the company for most of the interest payments, to help Sunzone double its production capacity.

Heavily subsidized land and loans for an exporter like Sunzone are the rule, not the exception, for clean energy businesses in Changsha and across China, Chinese executives said in interviews over the last three months.

But this kind of help violates World Trade Organization rules banning virtually all subsidies to exporters, and could be successfully challenged at the agency’s tribunals in Geneva, said Charlene Barshefsky, who was the United States trade representative during the second Clinton administration and negotiated the terms of China’s entry to the organization in 2001.

Between sweet deals like this, restrictions on imports into their market, and currency manipulation that keeps the price of its exports low, China is on track to produce more than half of the world's solar panels this year - and they will make nearly half of the world's wind turbines, planning on "large scale exports" for those as well. Alternative energy companies in the US and Europe are having a hard time getting loans at home (thanks, big banks!), and with the Chinese banks giving out these low-interest loans like candy to everyone, naturally the production jobs are starting to move there.

Our trade deficit with China hit record levels in August - it's well past time to step up our efforts at addressing the problem. And no, this is not "China bashing" as some immature headline writers at the Freep would contend, this is an issue that affects the entire global economy.

The question still remains: Do we want to manufacture in this country, or not? If so, we get going. Let's hope the administration does file something with the WTO, and then we will see what happens next. Just pray it's not too late.