US drags China to WTO

The United States on Wednesday filed a case against China with the World Trade Organisation, alleging that the Asian powerhouse was illegally subsidising the production of wind power equipment.

Under its Special Fund for Wind Power Manufacturing, China appears to provide subsidies that are prohibited under WTO rules, because the grants awarded under the programme seem to be contingent on Chinese wind power equipment manufacturers using parts and components made in China rather than foreign-made parts and components, the US said.

"Import substitution subsidies are particularly harmful and inherently trade distorting, which is why they are expressly prohibited under WTO rules," US Trade Representative Ron Kirk said in a statement.

"These subsidies effectively operate as a barrier to US exports to China. Opening markets by removing barriers to our exports is a core element of the President's trade strategy," he said.

"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," Kirk said.

The development, The New York Times, said represents an escalation of trade tensions between the two countries over clean energy. The US Trade Representative (USTR) said the size of individual grants currently available under the Special Fund for Wind Power Manufacturing ranges between $6.7 million and $22.5 million.

Chinese manufacturers of wind turbines and Chinese manufacturers of parts and components for wind turbines can receive multiple grants as the size of the wind turbine models increases. The USTR estimated that the grants provided under this programme since 2008 could run into several hundred million dollars.

Today's action arises out of an investigation the USTR initiated in response to a petition filed by United Steelworkers (USW), a trade union representing American workers in the steel, paper and forestry, rubber, manufacturing, energy, allied industrial and services industries.

That investigation was initiated on October 15 and addressed allegations relating to a variety of Chinese practices affecting trade and investment in the green technology sector, including not only prohibited subsidies, but also export restraints, discrimination against foreign companies and imported goods, technology transfer requirements and domestic subsidies causing serious prejudice to US interests, it said.

The USTR was able to make progress on some of these other areas of concern during the course of the investigation through its bilateral engagement with China.

"We will continue to work closely with the USW and other stakeholders in the months ahead on the remaining allegations. If we are able to develop sufficient evidence to support those allegations and they can be effectively addressed through WTO litigation, we will pursue the enforcement of our rights at the WTO independently of Section 301," Kirk said.