U.S. Says Some Chinese Subsidies Violate Trade Rules

WASHINGTON — Under pressure from Congress to do more to confront China on economic issues, the Obama administration has notified the World Trade Organization of nearly 200 Chinese subsidy programs, saying many of them may violate free trade rules.

Ron Kirk, the United States trade representative, said in a statement on Thursday that many of the subsidies had been identified as part of a yearlong American investigation of how the Chinese government helped bankroll the rapid growth of its clean energy industries. In solar and wind power, in particular, American companies have had trouble keeping up with Chinese competitors.

The action by Mr. Kirk’s office comes as the Senate is considering a bill challenging China’s manipulation of its currency as a trade tool. The Chinese government strongly condemned that bill, and House Republicans and the White House have also expressed reservations.

But with the trade representative’s long list of ways that China subsidizes its domestic industries, the Obama administration was now taking a more head-on approach to Chinese trade. Whether or not any of those subsidies violate international trade rules, the American trade office says China is already out of bounds by not having reported them to the W.T.O.

The W.T.O. requires member countries to disclose details of their subsidies every two years. But China has disclosed its subsidies only once since it joined the W.T.O. in 2001.

The goal of requiring the reports was to help other countries study the subsidies and determine whether any of them violated trade rules that prohibit using government money either to help companies buy market share in other countries or to discourage imports.

The only time China filed a report was in 2006, and it was a short list that included only subsidies at the national level — not China’s numerous provincial or municipal subsidies.

Notifying the W.T.O. about China’s undisclosed subsidies would not set off any automatic moves to consider sanctions. In fact, China already agreed in recent years to repeal or let lapse about half of the subsidies on the administration’s list in efforts to resolve parts of other trade disputes.

And in the past, members of Congress who demand tougher trade action against China have shown little interest in technical moves like the one taken by the trade representative Thursday.

Of the subsidies still in place, half have been identified as part of a yearlong American investigation into how the Chinese government has helped bankroll the rapid growth of its clean energy industries.

The rest represent a grab bag of miscellaneous policies, including a national exemption from certain stamp taxes and the provision of low-cost land to businesses in China’s Anhui province. The American filing with the W.T.O. said that many of these were “actionable” as violations of free trade rules.

But it is the clean energy subsidies that might be most significant. Through various types of support, China has helped transform its wind turbine and solar panel manufacturers from also-rans into the world’s dominant producers in just five years. The American solar panel industry has been crumbling in the face of plunging prices forced by Chinese exports, with three companies — Solyndra, Evergreeen Solar and SpectraWatt — filing for bankruptcy in August alone.

Solyndra’s collapse has generated its own controversy within the United States, with critics saying the Obama administration made a bad bet in providing $527 million in federal loan guarantees to the company.

One of the largest non-Chinese survivors in the solar industry, SolarWorld, blamed Chinese subsidies in part for the closing last week of a 186-employee factory in Camarillo, Calif.

“Pervasive and all-encompassing Chinese subsidies are decimating our industry,” said Ben Santarris, a spokesman for SolarWorld, which is based in Germany but has more than 1,100 employees in the United States, even after the Camarillo factory closing. SolarWorld has been holding discussions with American officials, trade lawyers and competitors on how to respond to the Chinese subsidies, Mr. Santarris said. Commerce ministry officials in China have repeatedly denied that the country’s subsidies for clean energy industries violated W.T.O. rules. The commerce ministry was closed this week for national holidays.

In examining China’s clean energy subsidies over the last year, the Obama administration has already filed one complaint to the W.T.O. That filing involved a subsidy by Beijing of $6.7 million to $22.5 million for each wind turbine manufacturer that used parts made in China instead of imported parts. China responded by agreeing last June to revoke the subsidy.

But wind industry analysts have described that subsidy as only one of many, and not especially vital to the Chinese industry’s financial strength.

Article source: http://www.nytimes.com/2011/10/07/business/us-says-some-chinese-subsidies-violate-trade-rules.html?partner=rss&emc=rss