The Obama Administration’s announcement yesterday of a request for WTO consultations regarding Chinese protectionism for green energy manufacturing is a move that is bullish for the steel industry and steel equities. Chinese protectionist measures such as import-prohibition in manufacturing, subsidies and other industrial policies that violate Chinese promises made to join the WTO have an inordinate impact on manufacturing in the US as well as the steel industry which is the major supplier to manufacturing.
This is good news for the steel industry and steel equities.
The Obama Administration today announced that the US has begun a dispute settlement process at the WTO with China regarding Chinese protectionism for their wind powering manufacturing sector. The US claims that China appears to provide subsidies that are prohibited under WTO rules because the grants awarded under the program are contingent on domestic content provisions that are not consistent with WTO treaties.
A successful resolution of this case is important to the domestic steel industry in two separate ways. First, the Obama Administration’s support of the many domestic trade cases with China in general are supportive of the domestic steel industry to the extent that China at times has engaged in seemingly predatory protectionist trade practices in steel. Second, many components sold into the wind power manufacturing sector are made out of steel; stipulating unreasonable and non-WTO compliant domestic content means that steel-intensive products potentially exported into China won’t be.
After reviewing the USW’s petition regarding China’s green energy policies as described below, the USTR decided to request consultations under the WTO with China concerning the country’s program known as the Special Fund for Wind Power Manufacturing which appears to provide import substitution subsidies that are inconsistent with WTO practices.
The USTR also noted that in recent meetings of the US-China Joint Commission on Commerce and Trade, China agreed to terminate two of their objectionable programs that provided export subsidies and import substitution subsidies, as well as modify their criteria for approval of new wind power projects which called for foreign companies to have prior experience supplying equipment to China.
On October 15, in a response to a petition filed by the USW in early September, the United States initiated an investigation under Section 301 against China relating to policies and practices that impact green technologies. The petition commented that China uses policies inconsistent with the WTO to protect and support Chinese producers of wind and solar energy products, advanced batteries and energy-efficient vehicles, among other products. The USW said that the WTO-inconsistent policies include export restraints, prohibited subsidies, discrimination against foreign companies and imported goods, technology transfer requirements, and domestic subsidies causing serious prejudice to US interests. Under the Section 301 statute, the USTR decided to delay – for up to 90 days – the request for consultations with China to verify and improve the petition.