On October 20, 2010, the Office of the United States Trade Representative (“USTR”) initiated an investigation into China’s policies affecting trade and investment in green technologies. Initiation of Section 302 Investigation and Request for Public Comment: China–Acts, Policies and Practices Affecting Trade and Investment in Green Technology, 75 Fed. Reg. 64776. The investigation was initiated in response to a petition filed under Section 301 of the Trade Act of 1974 (“Petition”) by the United Steelworkers. The green technologies covered by the Petition include products used to produce energy from wind, solar, biomass, geothermal, hydro, and nuclear resources; products to enable the production of energy from coal with fewer greenhouse gas emissions; and products that consume less energy or alternative sources of energy, such as energy-efficient vehicles and energy-efficient lighting.

The Petition alleges that China “employs a wide range of policies to stimulate and protect its domestic producers of green technology,” enabling China to become the dominant global supplier of green technologies. These policies include restrictions on access to critical minerals, including rare earth elements; prohibited subsidies contingent on export or domestic content; discrimination against foreign firms and goods; technology transfer requirements for investors; and trade-distorting domestic subsidies. The Petition contends that these policies have permitted China to become the dominant global supplier of green technologies, drained investment from the U.S. to China, transferred technology and research and development from the U.S. to China, cost American workers jobs, and increased the U.S. trade deficit.

In response to USTR’s October 20 notice and request for public comments, China’s Bureau of Fair Trade, Ministry of Commerce (“MOFCOM”) filed a submission requesting that USTR terminate the investigation. MOFCOM contends that the Petition is factually erroneous and legally unfounded. MOFCOM also believes that continuation of the investigation will damage existing U.S.-China collaboration on green technology, damage the countries’ overall bilateral relationship, and cast doubt on the U.S. government’s commitment to multilateral climate change initiatives.

If USTR elects to move forward with the investigation, it has until January 18, 2011, to request WTO consultations. The U.S. and China would then have 60 days to resolve the dispute. If a resolution is not forthcoming, the United States would then have the right to request the establishment of a panel by the WTO Dispute Settlement Body.