U.S. steelworkers target China

(Feng Li)
By Howard Schneider
Friday, September 10, 2010

The United Steelworkers union launched a broad challenge Thursday against China, alleging that it is illegally helping its companies seize a dominant market share of the renewable energy industry through an extensive arsenal of subsidies and trade restrictions.

The move targets China's practices in a sector that President Obama has said is critical to the renewal of the struggling U.S. economy. But the complaint could also generate controversy for the White House ahead of the midterm elections in November.

The country's trade deficit with China is a sensitive issue for some voters, particularly in regions of the country where factories have been closing. New trade data released Thursday showed that the overall U.S. trade deficit narrowed in July, and exports rebounded after a June decline. But the monthly trade shortfall with China remained, at $25.9 billion, near an all-time high.

The Obama administration has 45 days to decide whether to accept the steel union's complaint, which was filed with the office of the U.S. trade representative. It then would have to pursue the matter with China and perhaps in the World Trade Organization - a decision that would come just days before the elections. Following the union's filing, several Democratic lawmakers lauded the effort, an indication of how much political pressure will be on the White House to pursue the matter.

In its complaint, the steel union claims that China flouts WTO rules by subsidizing companies that export solar panels, wind turbines and other "green energy" products, blocking imports of those goods from other countries, and restricting the sale of hard-to-obtain minerals that foreign energy companies need to compete.

The union is asking the Obama administration to open talks with the Chinese under a process established by the WTO, and if those negotiations fail, to pursue the matter with a formal WTO complaint. The steel union officials said they had kept administration officials informed of their plans to pursue the complaint, but had not discussed the timing or coordinated the effort with them.

"These practices have enabled China to emerge as a dominant supplier of green technology," with an estimated 50 percent share of world solar panel production, USW President Leo Gerard said in a conference call Thursday morning. "It's a direct violation of the obligations China undertook when it joined the WTO."

USTR spokeswoman Nefeterius McPherson said the agency "will review the petition in accordance with established procedures."

Wang Baodong, a spokesman for China's embassy in the United States, said that some of the same industries targeted by the USW complaint import higher-end components from American firms, benefitting U.S. workers. In the USW briefing, union officials noted that some Chinese energy firms had established plants in the United States - a development the union said it welcomed.

"We . . . hope some people in the U.S. will take a rational attitude toward this matter, by focusing more on ways to enhancing bilateral cooperation rather than creating obstacles," Wang said.

The United States has imposed duties on dozens of Chinese goods in cases where products were subsidized by China or unfairly priced and "dumped" on the U.S. market. But the case brought by the steel union is much broader, alleging that an entire industry has been sheltered by a network of government support that crimps U.S. manufacturers's ability not only to compete in their own market, but also to export to other nations.

Gerard said unionized steel, aluminum, glass and other plants have lost thousands of jobs to Chinese manufacturers in recent years. The complaint cited five broad areas in which the union argues that China's policies violate WTO rules - from export restrictions on rare-earth elements that other countries need for renewable energy products, to unfair subsidies and financing arrangements for Chinese exporters. In some cases, Gerard said, U.S. firms that establish joint ventures with Chinese companies must hand over technologies and designs as a condition of doing business.

"As they steal the technology and force the companies to China, they are locking down" research and development, Gerard said. "If we are not going to do solar panels and fluorescent bulbs and wind turbines here, the next generation of R and D will not be here."

Treasury Department and other U.S. officials have tried to handle some of the more sensitive economic issues between the two countries through negotiations. The administration has pressed China, for example, to change its currency policies. But it so far has refrained from using U.S. laws designed to punish countries that manipulate exchange rates.

While Thursday's trade data showed that the bilateral trade deficit with China remains high, Undersecretary of Commerce for International Trade Francisco Sanchez noted that the overall numbers showed "very bright spots" for U.S. exports to fast-growing Asian and Latin American nations. He added that exports throughout major southeast Asian nations were up 40 percent this year amid strong regional economic growth.

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