The Obama administration is now opening an investigation of whether China’s policies promoting production and sale of clean, green energy technology violate U.S. trade laws and World Trade Organization rules. U.S. Trade Representative Ron Kirk said the government takes claims of unfair trade filed by the United Steelworkers “very seriously.”
The strong action sends a warning signal to China about a wide range of its policies, such as restricting access – including favoring domestic companies and cutting off foreign firms – to certain rare earth materials. These critical components of many energy efficient products are nearly exclusively produced in China.
At the same time, the administration delayed a required report on China’s manipulation of it currency, a major contributor to the huge American trade deficit with China overall as well as specifically in green technology.
Within 90 days the government could initiate bilateral discussions with Chinese officials, but most likely the U.S. will file a complaint with the WTO that could take years to resolve.
The Alliance for American Manufacturing (an industry-labor coalition), the AFL-CIO, the Steelworkers (who have promoted both windpower manufacturing and organizing the industry’s workers), and the Blue-Green Alliance of unions and environmentalists were among the groups praising the action.
Beyond its economic merits, the investigation could also marginally help Democrats some in the mid-term elections, since strong majorities of voters support alternative energy, like wind-generated electricity, and also worry about losing jobs to China.
Obama’s stimulus plan saved a threatened American windpower industry and created or saved tens of thousands of jobs, including many in manufacturing (even though 40 percent of components were imported). But China’s stimulus package included twice as much for renewables and green technology, in addition to other large-scale past and promised future public subsidies.
China’s renewable energy sector is big and growing fast both in domestic and export markets. China is now the leading global producer of windpower technology (having doubled its domestic generating capacity in 2009 and begun exporting at very low prices), solar panels (30 percent of world output), and compact fluorescent bulbs (75 percent of the world’s production) and is rapidly expanding efficient automobile production an export.
As th Chinese industry has grown, so has the U.S. trade deficit in green energy technology – half of it to China alone, with whom the renewable energy trade deficit has grown more than three times faster than in other areas. At the same time, the Steelworkers argue, Chinese policies have undermined U.S. exports to both China and Europe.
The union’s petition argues that China has broken global trade rules, not only in restricting access to critical materials, but also in four other arenas: setting performance requirements (such as requiring U.S. investors to license key technology to Chinese competitors); discriminating against foreign firms (such as requiring high domestic Chinese content in Chinese projects or production); employing prohibited export subsidies and requirement; and through its huge subsidies distorting the global market and pricing patterns.
Despite the harm inflicted on current and potential U.S. manufacturers and the long-term losses to a potentially important new industry and source of jobs in the U.S., China’s aggressive venture into green energy technology is ultimately good: As a result, China can avert some of its growing greenhouse gas emissions, reducing the rate it continues to build more coal-fired power plants. And it can – under the right conditions – help drive the worldwide development of the sector.
The United States and other countries need to balance two competing strategies. First, there need to be some rules for trade, and if the rules – weighted though they are to multinational corporate interests – mean anything, they must be enforced (as the U.S. is now contemplating).
But America – and the WTO – needs to recognize that governments need a greater degree of “policy space,” as Harvard economist Dani Rodrik and others argue. They must acknowledge that government-led national industrial policies make sense for not only industrializing countries like China but also for advanced countries.
Indeed, U.S. fair trade advocates have criticized some of the rules the Sec. 301 trade petition seeks to enforce and have urged the U.S. to buy American, provide subsidies for developing industries, or require domestic content (for many years proposed for the auto industry). But there’s also a risk that countries’ industrial policies could degenerate into international counterparts to the U.S. tax break and subsidy bidding war among states and localities for new factories or corporate headquarters.
Ultimately, despite some Obama successes and many stymied initiatives, the U.S. does not have a full-fledged program promoting both manufacture and installation of wind, solar and other renewable energy sources. It’s time to face the challenge of how governments can strike a better balance between equitable trade rules and legitimate public action to nurture industries whose rapid growth is in their national interests – and in this case, the global interest as well.
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David Moberg, a senior editor of In These Times, has been on the staff of the magazine since it began publishing in 1976. Before joining In These Times, he completed his work for a Ph.D. in anthropology at the University of Chicago and worked for Newsweek. He has received fellowships from the John D. and Catherine T. MacArthur Foundation and the Nation Institute for research on the new global economy.