'China Wins, U.S. Loses in Clean Energy'

Or at least that's the sense you get from reading Keith Bradsher's recent piece in the NYT. It alleges that China subsidizes its renewable energy sector to such an extent that some of the practices may violate WTO rules. And lo and behold, the United Steelworkers union filed a case on the same day that called for ending the "...broad range of WTO-inconsistent policies that China has employed to vault ahead of the United States as a leading producer and exporter of green technologies."    


I am not a trade lawyer and can't speak to whether all the specific USW charges are actionable under the WTO (and the entire petition is a whopping 5,800 pages!). But let's look at some of the arguments in the NYT piece. First, the mere fact that China subsidizes its clean energy sector is nothing new. China subsidizes its traditional energy sectors too. In terms of the specific subsidies, preferential land-use rights are invoked as an unfair subsidy. As Stan Abrams over at China Hearsay noted as well, I think on the face of it, this seems a strange charge. Land is cheap in China, and the local officials control the land. This was the case when China joined the WTO in 2001...so now it violates the WTO? Local officials also give tax breaks to firms deemed "high and new-tech", which most renewable energy firms would qualify. 

But beyond these specific problems, there is a larger issue here. The USW case and the NYT pieces are creating a narrative that the US stands to lose in clean energy and that the much ballyhooed US-China "win-win" scenario in clean energy won't last. One way to interpret this is simply election-year gamesmanship involving China again. But I think this goes beyond the election--it is an area that cuts at the heart of US competitiveness, jobs, manufacturing, and innovation, which can stir the passions of various interest groups. It's true that China specializes in the production of clean energy like wind and solar, thereby creating jobs in the process. Yet, where is the concrete evidence that a "green" job gained in China equals a "green" job lost in the US (are there compelling studies out there on this)? And as Michael Levi of CFR argued, it's not entirely clear that it's necessary or beneficial to have a fully integrated renewable energy value-chain within a particular country, US or China. As I've written previously, the prism through which we are viewing Chinese leadership on clean energy may be hyperbolic. 

China clearly views clean energy as a strategic objective, existing within a system where the state guides its development through industrial policy. Does that mean the US should adopt its own industrial policies, pick winners? Or is the intent of all this a rallying cry for more government support? US companies have undoubtedly encountered problems in China (see previous post here), but that's a far cry from declaring that China is beating us to smithereens. 

(NB: Is it just me or is it that every other piece the NYT has on China--from its op-ed pages to reportage--seems to dwell on how much we are losing to them?) 
       
 
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Damien Ma is a fellow at the Paulson Institute, where he focuses on investment and policy programs, and on the Institute's research and think-tank activities. Previously, he was a lead China analyst at Eurasia Group, a political risk research and advisory firm.

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