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WTO complaint casts shadow over China's state visit to US

UNITED STATES: Wind power had scant mention publicly when presidents Hu Jintao and Barack Obama met during the Chinese leader's first state visit to the United States.

Presidents Hu Jintao and Barack Obama sidestep the issue of wind energy
Presidents Hu Jintao and Barack Obama sidestep the issue of wind energy

And that may have been precisely because of wind's central role in current US-China trade relations. The US Trade Representative (USTR), part of Obama's administration, is pressing a complaint at the World Trade Organisation (WTO) accusing China of illegally subsidising its wind sector.

Outwardly, the mood during Hu's visit was of conciliation and trust-building - although the nuances suggested a firm stance on either side in trade relations and economic development. "We're moving ahead with our US-China clean-energy research centre and joint ventures in wind power, smart grids and cleaner coal," Obama said, while calling for fair treatment of US companies in China.

As the leaders met, two preliminary US-China wind deals were announced. Chongqing Energy Investment Corporation has agreed with power company AES Corporation to jointly develop 700MW of wind in China over three to five years. And energy company UPC Management signed a $1.5 billion agreement with power company Guodian Corporation to build seven wind farms totalling 1.08GW over three years across four Chinese provinces.

It is surprising wind was not at the forefront during the Washington meeting, notes Andrew Hang Chen of Usfor Energy, which consults with Chinese state-owned wind companies seeking US business. "I think both parties were pretty cautious because of the WTO consultations," he says.

There were no senior Chinese wind representatives among the business officials accompanying Hu, although there were rumours that Hu was later to visit a wind facility in the Chicago area.

In China, the USTR's decision is seen as China-bashing. Zhang Guobao, then minister for China's National Energy Bureau, claims that the US extends far more in subsidies to new energy companies than China. "The US government's move is a gesture to domestic public opinion," he says.

Dr Joanna Lewis, assistant professor of science, technology and international affairs at Georgetown University, partially agrees: "The Obama administration's decision to pursue a WTO complaint against China's practices in the wind power sector was primarily driven by US domestic politics. Protectionism has been practiced in the wind power industry for decades in many countries, including the US."

Two months of mandatory WTO consultations have started between the US and China, sparked by a 5,800-page complaint from the powerful United Steelworkers trade union. The USTR is only targeting China's special fund for wind power manufacturing, which supports the development of turbines larger than 1.5MW and stipulates these must use at least 51% Chinese parts. The fund, says the USTR, has disbursed up to "several hundred million dollars" since 2008.

Toned down

Yet the USTR is not proceeding with most of the allegations in the union's broad petition, which was so severe in tone that it rocked the Chinese wind industry and made headlines in China. "The USTR 's complaint is much less intimidating," says Chen. "This will not be that hard to resolve."

In December, China had agreed to modify its criteria for approving new wind projects by no longer requiring foreign turbine makers to have prior experience in China. China also confirmed its 2009 vow that it has ended other "discriminatory provisions" such as local content requirements in the wind manufacturing sector.

For many, the real issue is that China has fully supported its booming domestic wind sector while, for complex political reasons, the US has not acted similarly. "The world can't afford to have either of these countries stand on the sidelines. says Robert Kapp, former president of the US-China Business Council. "It's up to the US now to get into the (cleantech) game."

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