Folds after initial consultationsBy Peter A. Buxbaum, AJOTThe United States won a victory last month in a World Trade Organization case it brought against China when China agreed to end wind power equipment subsidies after initial consultations. As a result, the government of China agreed to close its Special Fund for Wind Power Equipment Manufacturing. The Chinese capitulation at an early stage of the proceeding was especially sweet, because it obviated potential years of litigation and implementation and retaliation disputes. It was also significant in that this was the third case in which the Chinese agreed to eliminate subsidies after initial WTO consultations. The U.S. brought the case to the WTO following an investigation initiated in response to a petition filed by the United Steelworkers. The investigation found that Chinese wind turbine manufacturers were eligible for Special Fund grants only if they agreed to use Chinese-made parts and components. The size of the individual grants ranged between $6.7 million and $22.5 million and totaled hundreds of millions of dollars since 2008. “The United States is pleased that China has shut down this subsidy program,” said Ron Kirk, the U.S. trade representative, in a statement. “Subsidies requiring the use of local content are particularly harmful and are expressly prohibited under WTO rules. This outcome helps ensure fairness for American clean technology innovators and workers. We challenged these subsidies so that American manufacturers can produce wind turbine components here in the United States and sell them in China. That supports well-paying jobs here at home.” The wind power market in China has grown by more than 100 percent annually over the last four years. China’s installed capacity for wind power now ranks second in the world, behind the United States and ahead of Germany. The WTO challenge was initiated as a result of an investigation launched by USTR in response to a petition the United Steelworkers filed under Section 301 of the Trade Act of 1974. Section 301 authorizes the President to take action against foreign government practices that discriminate against, or burden or restrict, U.S. commerce. Cases may be initiated by the USTR or as the result of a petition filed by a company or industry group. The investigation was initiated on October 15, 2010. It probed allegations relating to a variety of Chinese policies and practices affecting trade and investment in the clean energy technology sector, including subsidies. The United States held WTO consultations with China on February 16, 2011. In those consultations, the United States asserted its view that the subsidies provided to Chinese wind turbine manufacturers under the Special Fund program were prohibited because they were conditioned on the use of domestic over imported goods. Following those consultations, China took action formally revoking the legal measure that had created the Special Fund program. This is the third successful WTO challenge that the United States has brought against Chinese government subsidies. In each of these cases, following formal consultations at the WTO, China agreed to eliminate the subsidies that the United States had challenged. In 2007, the United States and Mexico challenged several tax-related subsidies that benefited a wide cross-section of China’s manufactured goods, claiming that those subsidies illegally supported Chinese-made goods and discouraged the purchase of imports from the United States. In 2008, the United States, Mexico, and Guatemala challenged a Chinese government subsidy programs that promoted worldwide sales of Chinese brands. The USW, for its part, has been active in promoting jobs for U.S. steelworkers in the wind power industry. Last year, the Steelworkers signed a deal with two Chinese companies, A-Power Energy Generation Systems Ltd. and Shenyang Power Group (SPG), to work together on manufacturing, assembly, component sourcing, distribution, and wind energy project develo