Clean Energy Trade Wars: China Ends Preferential Subsidies to Domestic Wind Companies

China says it will stop giving preferential treatment to domestic wind companies, which may make it easier for American manufacturers to compete with rapidly-growing Chinese firms. As USA Today reports:

The World Trade Organization prohibits government programs that give preferences to companies using local products, such as China’s program of “indigenous innovation.” The wind power grants ranged from $6 million to $22 million, Kirk’s office says. “This outcome helps ensure fairness for American clean technology companies and workers,” Kirk says.

James Bacchus, a former World Trade Organization chief judge and member of Congress, says these types of trade subsidies “stand out as a sore thumb. They are patently illegal.”

This comes after the United Steelworkers Union filed a complaint last December with the U.S. trade representative, saying that China’s $216 billion in subsidies that specifically benefit domestic companies over foreign companies made it very difficult to compete. The U.S. government’s response:

“These subsidies effectively operate as a barrier to U.S. exports to China. Opening markets by removing barriers to our exports is a core element of the President’s trade strategy. Our decision today, along with the two other WTO cases that we recently filed against China, underscores our commitment to ensuring a level playing field with China for American workers and businesses.”

Manufacturers also claimed such incentives allowed Chinese companies to manufacture products in China, bring them over to America, take advantage of U.S. subsidies, and beat out American companies to projects. (Thus, a Buy American provision was enacted for certain portions of stimulus funds – a move that didn’t make Chinese companies very happy.)

So will this latest trade development open up the exploding Chinese market to American turbine and components manufacturers? Steve Sawyer, the Secretary General of the Global Wind Energy Council tells Climate Progress:  “I don’t think so…. the only American company ‘competing’ in the China market is GE … and they have a small market share and don’t appear to be aggressively pushing it.”

Still, the move is an important one for broader international trade relations:

Eswar Prasad, a Cornell University senior professor of trade policy, calls the action by China “symbolically very important.”

“Whether it opens the floodgates to a broader set of commitments remains to be seen,” Prasad says. “I think it is premature to declare victory, but it is certainly a hopeful step.”

A deep thirst for new sources of energy and consistent incentives for wind developers have allowed China’s wind industry to outpace America’s in recent years, raising concerns among U.S. and European manufacturers that China would strong-arm existing players out of the market. However, while Chinese companies like Goldwind, Sinoval and Dongfang Electric have crept into the top ten global manufacturers, they are not yet competing in bankability, branding and proof of long-term reliability.

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