USW Requests USTR Address Chinese Subsidies on Green Technology in Section 301 Petition

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September 12, 2010

Recently, the United Steelworkers Union (USW) filed a Section 301 petition with the United States Trade Representative (USTR) alleging that China has been providing “unfair” subsidies and trade barriers to support its clean energy sector. Under Section 301, "the United States may investigate and sanction foreign countries that maintain acts, policies and practices that violate, or deny US rights or benefits under, trade agreements, or are unjustifiable, unreasonable or discriminatory and burden or restrict US commerce." The USW petition requests that the Obama Administration initiate dispute settlement proceedings at the World Trade Organization (WTO) and, in doing so, pressure the Chinese government to desist from providing this "unfair" support to its clean energy sector.

According to the complaint, “the petition details the broad range of WTO-inconsistent policies that china employed to vault ahead of the U.S. as the leading producer and exporter of green technologies.” Specifically, USW is claiming that China’s policies included prohibited subsidies, discriminatory laws & regulations, technology transfer requirements, and restrictions on critical raw materials (“rare earth metals”).

USW claims that these policies and practices promote Chinese production and export of green technologies in many items from light bulbs to advanced solar panels. To support this position, the 5,800 page petition provides examples of U.S. companies that have shifted production, investment and technology to China in response to these policies.

USTR must decide whether to initiate a formal Section 301 investigation within 45 days of receipt of the petition. Upon initiation of an investigation, USTR must request consultations with the foreign government. The primary aim of the consultations is to encourage the foreign government to remove the offending practice. In most cases, negotiations are sufficient to convince the allegedly offending country to comply with its international obligations. When a Section 301 investigation involves an alleged violation of a bilateral, regional or multilateral trade agreement of which both the United States and the nation/customs union at issue is a part (such as the WTO agreement), USTR must by law    follow that agreement's dispute settlement provisions. Since USW’s petition alleges Chinese violations of WTO rules, any subsequent investigation must therefore result in the U.S. requesting a dispute settlement proceeding at the WTO .

Historically, Section 301 petitions have yielded little action. Since 1995, only one petition has resulted in sanctions as a result of a 301 investigation, although many have been settled with the targeted country through negotiations.   However, many critics have criticized these settlements for being far too weak.

Many Congressional Democrats have already come out in support of the petition and urged the Obama administration to initiate an investigation. For its part, the administration has made no comments on its intentions, but given his more determined stance on trade enforcement issues and focus on green technology jobs President Obama may find it difficult politically to deny this request.

More information on the status of this petition will be posted to www.barnesrichardson.com as it becomes available.