WTO action against China has major implications for wind power companies that compete with or have manufacturing interests in China

On December 22, 2010, the United States Trade Representative (USTR) began formal World Trade Organization (WTO) proceedings against a Chinese wind energy subsidy program known as the Special Fund for Industrialization of Wind Power Equipment. According to USTR, the program has provided subsidies amounting to “several hundred million dollars” to Chinese manufacturers of wind turbines and components. USTR is alleging the subsidies violate WTO rules because government funding is contingent on Chinese wind power equipment manufacturers using Chinese parts and components. (WTO rules prohibit subsidies contingent on the use of domestic products.)

The first step of the WTO proceeding is a consultation period, which is expected to last at least a few months. As part of the consultation process, USTR is requesting comments from the public about the case. Any entity that has an interest in submitting comments should do so by January 31, 2011.

If the consultations do not resolve the issue or make significant progress, USTR is expected to take the dispute to the next WTO stage: litigation. Other WTO members, including the European Union, will likely join the action to help safeguard the interests of their domestic wind power sectors. A WTO ruling on China’s wind power subsidy program, which could be issued as early as the second half of 2011, could significantly influence government support in the wind power sector, not just in China, but in countries around the world.

The McDermott Difference

McDermott Will & Emery’s International Trade Practice, which is actively engaged in WTO and U.S.-China matters, and which has the support of our Shanghai-based strategic alliance partner, MWE China Law Offices, can advise and assist clients with interests in the wind energy sector by counseling on strategies for their business operations affected by the action, assisting in the preparation of comments to USTR or otherwise participating in the case. Even businesses that prefer to avoid being directly involved in the action may have an interest in understanding and monitoring the case, as the outcome could have a large impact on future global trade in the wind turbine and wind energy power sector