On September 9, 2010, the United Steelworkers Union (USW) filed a petition under Section 301 of the Trade Act of 1974 with the United States Trade Representative (USTR) against China with regard to its support of the Chinese clean energy sector. The USW petition requests that the Obama Administration initiate dispute settlement proceedings at the World Trade Organization (WTO) and, in doing so, pressure the Chinese government to desist from providing this "unfair" support to its clean energy sector.
The USW petition alleges that China violates WTO rules through direct and indirect subsidies, such as low-interest loans and land grants, to its clean energy sector. The petition also alleges that China violates WTO rules by requiring foreign clean energy companies to license their technology to Chinese partners before entering the Chinese market. Other alleged WTO violations relate to performance standards and preferential practices employed by the Chinese government as well as China's export restrictions on "rare earth" elements that are used to produce wind turbines, solar panels and fluorescent light bulbs.
The USW contends that China's support of its clean energy sector has unfairly contributed to Chinese companies expanding their market share for clean energy equipment to the detriment of American workers in those sectors, many of whom are USW members. According to the union, its members assemble wind turbine towers and produce steel for wind turbine towers and nuclear reactors, glass for solar panels, incandescent and halogen light bulbs, and gears and valves for various sorts of clean energy equipment.
Under Section 301, "the United States may investigate and sanction foreign countries that maintain acts, policies and practices that violate, or deny US rights or benefits under, trade agreements, or are unjustifiable, unreasonable or discriminatory and burden or restrict US commerce." A US business can file a petition with USTR requesting an investigation of a particular practice of a foreign country and whether that country is violating its WTO commitments. USTR must determine whether to initiate a formal Section 301 investigation within 45 days of receipt of the petition. Upon initiation of an investigation, USTR must request consultations with the foreign government. The primary aim of the consultations is to encourage the foreign government to remove the offending practice. In most cases, negotiations are sufficient to convince the allegedly offending country to comply with its international obligations. When negotiations fail, USTR may take action, including raising US import duties on a foreign country's products to respond to the trade damage. However, where, such as in the present case, a Section 301 investigation involves an alleged violation of a bilateral, regional or multilateral trade agreement of which both the United States and the nation/customs union at issue is a part (such as the WTO agreement), USTR must, by law, follow that agreement's dispute settlement provisions. Given that the USW's petition alleges Chinese violations of WTO rules, any subsequent investigation must therefore result in WTO dispute settlement proceedings.
Although Section 301 provides US unions and businesses a formal mechanism through which they can petition the US government for action before the WTO, it has been used infrequently since the organization's inception in 1995. Some Section 301 petitions have been brought to USTR in recent years, including one concerning China's alleged currency manipulation, but these petitions have either been rejected by USTR (as in the case with China's currency practices) or have been settled bilaterally. Indeed, no sanctions have been applied as a result of Section 301 investigations initiated since 1996, and none has resulted in a formal WTO dispute settlement case. In this way, Section 301 has been a rather weak, albeit public and available, tool for US businesses or unions to petition the US government to bring a case to the WTO.
However, the history of Section 301 should not be seen as a sure guide to the Obama Administration's future actions with respect to the USW petition. Section 301 has been used very infrequently over the last several years, and no Section 301 petitions have been filed with the Obama Administration. The Administration's close ties to organized labor, as well as the fact that USTR's initiation decision must be made only days before the November 2, 2010 midterm elections, could lead to a departure from past US practice on Section 301. Moreover, the US government has frequently complained about Chinese subsidies to "green" manufacturers and its export restraints on rare earth elements. Given these facts, initiation of formal dispute settlement proceedings based on the USW petition cannot be ruled out.
We attach the Executive Summary of the USW 301 Petition. The full text of the Petition is unavailable.