China defends its subsidies against US complaint

The news of the filed case against China in Geneva yesterday came about the same time as the announcement of President Hu Jintao’s state visit to the US. The WTO case was a response to United Steelworkers petition in September this year that certain Chinese companies were selling their wind and solar equipment on the global market at lower prices than most competitors elsewhere due to the subsidies received in China. The filed case claims that these subsidies violate global trade rules. US Trade Representative Ron Kirk is quoted as saying that these subsidies are ‘particularly harmful and inherently trade distorting’.

This means that consultations between the two nations will begin soon. If they fail to resolve the dispute, the WTO will convene a hearing panel. If the US wins the case and China nevertheless refuses to adjust its subsidies, then the US can impose penalty tariffs on Chinese wind and solar products equal to the lost revenue that US energy companies are experiencing.

China has responded relatively calmly to the complaint and the Commerce Ministry released a statement saying that every country in the world is seeking to develop renewable energy to cope with climate change and China’s measures reflect that as well. Beijing has been investing heavily in nurturing its renewable energy sector, with the country’s solar sector having had a phenomenal run this year. The government wants at least 15 percent of local power to come from renewable energy by 2020, and believes that these commitments are a way to reduce greenhouse gas emissions and limit the country’s dependence on imports of oil and gas.