On October 15, 2010, the Office of the U.S. Trade Representative ("USTR") announced the initiation of an investigation on claims made by the United Steelworkers ("USW") against China's policies affecting trade and investment in green technology. The investigation is the result of a petition for relief under Section 301 of the Trade Act of 1974, as amended, that was filed on September 9, 2010 by the USW.

The petition alleges that China's policies protect and unfairly support China’s domestic producers of green technology, for products ranging from wind and solar energy products to advanced batteries and energy-efficient vehicles. The petition identifies five categories of alleged violations of China’s World Trade Organization ("WTO") obligations. Those five categories are:

  • Restrictions on access to critical materials
  • Prohibited subsidies contingent on export performance or domestic content
  • Discrimination against imported goods and foreign firms
  • Technology transfer requirements for foreign investors
  • Trade-distorting domestic subsidies

Once an investigation has been initiated, the U.S. may request consultations, but USTR can delay such a request for up to 90 days. USTR Ambassador Ron Kirk announced that he had decided to delay the request for consultations with China pursuant to this procedure. He announced that the Section 301 investigation would "thoroughly examine and verify the USW's claims" and to "verify and improve" the USW's petition that the U.S. initiate a WTO proceeding.

A number of members of Congress praised the Obama’s Administration for taking action on the petition against China With the midterm elections approaching, and the Administration’s focus on job creation, it would have been politically difficult to reject the petition right before the November elections. Nonetheless, USTR’s statement that it needs to "verify and improve" the petition may indicate that USTR does not believe there are sufficient facts to go forward with a WTO proceeding immediately. During the additional 90 days, USTR plans to request public comments in response to a Federal Register notice. The public comment period will allow companies, such as those in the green technology and clean energy industries to weigh-in on the impact of pursuing a potential WTO case against China. Many companies already have business plans underway that could be negatively affected by such an action, and therefore companies in the clean tech space should monitor this issue carefully over the coming months.