TROUTMAN SANDERS LLP: Wind Power Equipment Subsidies Terminated by China After Successful WTO Challenge

New York, June 10, 2011. The Office of the U.S. Trade Representative (USTR) announced June 7 that China has ended targeted wind power equipment subsidies in response to a U.S. challenge at the World Trade Organization.

The WTO challenge of the Special Fund subsidies was initiated in response to a Section 301 petition filed by the United Steelworkers and initiated by USTR on October 15, 2010. The petition had sought action against a wide range of allegedly WTO-inconsistent Chinese policies on wind and solar energy products, advanced batteries, energy-efficient vehicles and other products, including export restraints, prohibited subsidies, discrimination against foreign companies and imported goods, technology transfer requirements and domestic subsidies causing serious prejudice to U.S. interests. However, USTR nly challenged wind power equipment subsidies in the formal dispute ettlement process at the WTO. USTR claims that it is addressing the other policies in the context of bilateral negotiations.

USTR alleged that China’s Special Fund for Wind Power Equipment Manufacturing provided grants to Chinese wind turbine manufacturers if the companies committed to using key parts and components made in China rather than purchasing imports. Such “local content” subsidies are prohibited under WTO rules. The U.S. estimated that the grants provided to Chinese companies since 2008 could have totaled several hundred million dollars. China agreed to withdraw the program after formal consultations under the WTO.

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