7th June 2011

China Eliminates Controversial Wind Power Subsidies: USTR

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Last updated 17:35 CET.

The United States Trade Representative is reporting that the US-China dispute over wind power manufacturing has concluded. China will end certain subsidies for wind power manufacturers that were contingent on domestic input, which had been a major source of contention between the two countries. This development comes seven months after the US had requested formal consultations at the WTO, the first step of dispute settlement proceedings.

According to early reports, the agreement focuses on China’s “indigenous innovation” programme, which the United Steelworkers (USW), a US-based labour union, estimated would award between US$6 and 22 million worth of subsidies to Chinese wind power companies that used domestic over imported goods. However, China’s “Ride the Wind” programme, along with others that had been challenged on the same grounds, appears not to be subject to the agreement. China had argued continuously that these programmes had already been eliminated in 2009.

Already in April sources had informally reported to ICTSD that the two parties had reached a mutually agreed solution that would put a temporary end to the formal proceedings. The dispute had found itself at the centre of international attention since its beginning, given that it was one of the first ‘green technology’ disputes brought to the WTO (see Bridges Trade BioRes Review, April 2011).

In the December 2010 consultation request, the US claimed that the special Chinese government fund that awarded grants to wind power makers was illegal under WTO rules. Washington argued that Beijing’s grants appeared to award funds based on the use of domestic over imported goods, a violation of Article 3.1(b) of the Subsidies and Countervailing Measures (SCM) Agreement.

The US had also taken issue with China’s failure to notify the WTO of these measures. Moreover, Washington alleged that Beijing had violated the commitments it made when acceding to the WTO by not making available translations of the domestic legislation regarding the grant program in English, French, or Spanish - i.e. the official languages of the global trading body.

The agreement reached between the parties seems to address all of these issues, as China has consented to end the criticised domestic content subsidies while making available documents evidencing their elimination and its effects. The WTO, however, has not been formally notified of the agreement, and it is likely that the US will take up the case again if China fails to comply with the deal’s terms.

More details on the agreement will appear in a longer article in tomorrow’s issue of Bridges Weekly.

ICTSD reporting; “China agrees to end domestic wind power subsidies,” USA TODAY, 7 June 2011.

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