The Unites States has put the Chinese government on notice: You’re violating more than 200 trade laws. The move was made by the Obama administration who is under pressure from Congress. The administration gave the notice to the World Trade Organization.
Representative for the United States government, Sam Kirk, in a statement he made on Thursday, said that after an investigation that lasted more than a year, the US has uncovered many illegal subsidies that were used to help bankroll the Chinese clean energy industry. Kirk cited specifically the wind and solar power industries as those where because of Chinese violations, the US has had trouble keeping pace.
The action by Mr. Kirk comes after word that the Senate may put forth a bill challenging the Chinese manipulation of its own currency. It is widely believed that because of this currency manipulation the Chinese are able to keep costs low, so low that there is no way the US can compete. The Senate may be on its own in this matter however, as the House of Representatives and the White House have both expressed reservations about the bill. The Chinese government has launched an official protest to the measure.
US Government is looking at China Subsidies
One bright spot: the Obama administration is now looking more at how the Chinese government approaches trading and how it has been subsidizing some of its more visible domestic industries. A spokesman for the administration said that it is looking more closely at how those subsidies may be in violation of international trade rules. Just by not having reported them to the WTO, according to the American Trade Office, the Chinese may already be in violation of several international trade laws. It is required under international law for countries to disclose the specifics of their trade practices once every two years at a minimum. The Chinese have not made such a disclosure since 2001.
Such requirements were put in place to help level the playing field in international trade, allowing other governments to see how some were going about funding certain trade industries, and whether these projects were in a any way in violation of international law and trade acts. The theory is, by making the practices transparent, they can keep them in line with trade policies, and thus keep trade open between nations. Whenever one government begins breaking these rules and looking to take an advantage, it threatens the open trade policies of other countries, and thus free trade overall.
Just by sending notice to the WTO does not necessarily set off any triggers for sanctions against the Chinese, however. As a matter of fact, the Chinese have agreed already to rescind nearly half of their subsidies on the administration’s list, all in the hopes of resolving any trade disputes now or in the future. It’s important to note that until now the US Congress has shown very little interest in making the Chinese adhere to these trade laws at all.
Clean Energy Sector a bit Dirty
One of the industries in question is of course the clean-energy sector. The US has questions about how the Chinese went about bankrolling this industry. Over-involvement by the Chinese government and over-inflated subsidies could be considered a mark of unfair practices and a violation of the free trade act.
This is the industry the US is most concerned about. In just five years, the Chinese have transformed a fledgling industry into one of the most formidable in all the world. It is this very short period of time that has free trade advocates most concerned, how the companies in any one industry could make so much progress so fast without an over-investment by their government. Such concern comes in the wake of the Solyndra scandal here in the US.