U.S. to investigate Chinese cleantech subsidies; China rebuffs claim

The U.S. will investigate claims that China is illegally subsidizing its cleantech industry, but China said the American probe threatens Sino-American relations.

The Obama administration announced on Friday that it would investigate claims that China is illegally subsidizing its clean energy industry, but a top Chinese energy official said on Monday that the U.S. probe was baseless and dangerous to Sino-American relations.

The announcements demonstrate two economic powers testing each other's patience on the global stage.

U.S. Trade Representative Ron Kirk said on Friday that China had violated World Trade Organization rules. The investigation was in response to a complaint filed by the United Steelworkers in September alleging that China's policies:

  • Protect and unfairly support its own cleantech manufacturers, including those who make wind and solar energy products, batteries and energy-efficient vehicles, "causing serious prejudice to U.S. interests."
  • Caused the annual U.S. trade deficit with China in green technology goods to increase substantially since China joined the WTO. (China is the top contributor to the U.S. global trade deficit in the sector.)

"This is a vitally important sector for the United States," Kirk said in a statement. "Green technology will be an engine for the jobs of the future, and this Administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs."

But a China Daily report quoted Chinese National Energy Administration head Zhang Guobao rebuffing American claims with a bit of chest-thumping.

"The United States will not win this trade war against China's new energy sector," he said, adding that there were no discriminatory rules in place for cleantech manufacturers. "The probe will backfire on itself by exposing more of the huge subsidies to its own clean energy sector."

According to Zhang, as quoted in the report:

  • China's subsidies to its clean energy companies are actually quite small. Meanwhile, the U.S. has subsidized American cleantech companies with $4.6 billion in cash from January to September 2010, with $3 billion to wind power companies alone.
  • Foreign wind power companies have failed to bid successfully since 2005 because their prices are higher than Chinese competitors.
  • Thanks to the American Recovery and Reinvestment Act of 2009 -- the stimulus -- the U.S. has subsidized the American renewable energy industry with $25.2 billion so far.
  • It's actually the Americans who aren't playing nice. One example: the U.S. Office of Energy Efficiency and Renewable Energy's six-month rule that requires subsidized solar power projects to use only U.S-made wafers.
  • American companies are doing quite well in China. American conglomerate GE has exported 80,000 kilowatts' worth of wind turbines to China; meanwhile, China has only exported three turbines to the U.S. totaling less than 10,000 kilowatts in capacity.

Zhang called for increased dialogue between the two nations on the topic of clean energy, but a recent talk scheduled for Oct. 12 was postponed.

There's no doubt that a little friendly rivalry can help both nations succeed in the cleantech arms race -- rapid Chinese growth has galvanized folks on Capitol Hill in a way that simple moneymaking has not -- but the real question is just how much rivalry can be fostered before it becomes destructive.

This post was originally published on Smartplanet.com