Washington loves free trade – if it produces a surplus for the U.S.
In an election year, with a modest economic recovery underway, American politicians are trumpeting their credentials in saving and creating jobs and protectionism sentiment against foreign products is rising.
And the number one target?
Hardly surprising, as during the period January-November China’s surplus balance of trade with the U.S. reached $272 billion, almost 8 percent higher than that registered during the corresponding period in the previous year, as U.S. consumers become more dependent on Chinese producers than ever before.
Without directly criticizing China, during his State of the Union address on 25 January President Barack Obama promised more jobs for the American public through initiatives.
So, where is the line in the sand over the ocean of red ink in trade with China to be drawn?
Apparently in the field of renewable energy.
Last November the U.S. Department of Commerce launched an "anti-dumping and anti-subsidy" investigation into China's solar battery exports to the United States.
Now its wind power’s turn.
What is surprising about the brewing dispute is the relatively minor amounts of money involved. The Department of Commerce announced that utility scale wind towers imported from China are targeted for investigation even though, according to U.S. Customs statistics, in 2010 China's wind technology exports were worth a paltry $104 million.
According to the investigation schedule of the case, the Department of Commerce is expected to make preliminary decisions on subsidies and dumping on 23 March and 6 June, respectively.
The brewing dispute has certainly drawn the attention of the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME.)
CCCME Legal Services Division deputy director Liu Pengxuwhen asked during an interview with Renmin Ribao, the Communist Party of China (CPC) Central Committee’s daily newspaper why Washington seemed to be picking a trade fight over Chinese renewable energy products replied, “On 20 January the CCCME stated that the root cause of the export growth of China's wind power products is its competitive market advantage; it is an inevitable result of the rapid development of China's wind power industry in recent years, the superior management of China's wind power equipment businesses and its advanced production technology and production scale advantage, rather than dumping at low prices or government subsidies. Large wind power operators in the U.S. welcomed China's wind power equipment products, believing that China's wind power equipment is not only technologically advanced and reliable, but will also help to reduce the investment cost of wind power due to reasonable prices and will promote the application and popularization of green energy in the United States.”
Noting the timing of the Department of Commerce investigation Liu added, “In addition, since the U.S. presidential election is around the corner, we noted that the U.S. government continuously makes speeches on domestic alternative energy policies, expressing support for its alternative energy industry. In connection with such a political environment, we are convinced that the United States' launch of the ‘anti-dumping and anti-subsidy’ investigation is inevitably connected with political considerations. Many U.S. importers have expressed opposition because they believe that subsidy is not the reason for Chinese products entering the U.S. market. As China's wind power enterprises remain in the middle of the industrial chain and there are a large number of other upstream and downstream businesses and users in the chain, the 'anti-dumping and anti-subsidy' investigation will also affect these users.”
What is clear is that, whatever Washington’s policies, China will continue to develop its wind power industries for both indigenous use and export. To give but one example, on 31 January Xinjiang Goldwind Science Technology & Co., China’s second-largest wind-turbine maker, signed a financial agreement with China Development Bank Corp. for wind power projects worth $5.5 billion. During 2006-2010 China’s market for wind power nearly doubled every year and domestic turbine makers kept expanding capacity before growth stalled in 2011. Renewable energy is one of seven “strategic” industries receiving government support as China attempts to diversify away from its coal-based energy production.
So China hardly needs the U.S. export market in wind technology at this point, but for both sides, it increasingly seems that it’s the principle that’s at stake.
All of which should make for some “frank and candid” diplomatic discussions when on 14 February China’s vice president Xi Jinping, who is widely expected to succeed President Hu Jintao next winter as China’s leader, visits the White House.
By. John C.K. Daly of Oilprice.com