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This post aims to marry my previous dispatches on EVs and the labor union petition against Chinese industrial policy in clean energy. Several things have happened to create an increasingly complex situation and bear updating.

1. In his testimony to the House Ways and Means Committee last Thursday, Treasury Secretary Tim Geithner spoke of the United Steelworkers' filing of the suit thusly:

We are in the process of reviewing carefully the evidence presented in the Section 301 petition filed by the United Steelworkers Union challenging a wide range of Chinese policies in the renewable energy sector.

Cautious words, but Geithner certainly seemed to have left the door open on pursuing the case, or at least taking a hard look at the substance. And why allude to it specifically if the case was going to be rejected outright anyway?

And this is where it could get interesting for EVs because the USW case specifically calls attention to Chinese attempts to impose quotas on the country's rare earth supplies, which could affect global prices. [Rare earth minerals--you can find them on a periodic chart--are critical for the batteries that power an EV. China right now produces about 90% of the world's rare earths, and some of its hawks are shouting that China ought to create an OPEC-like cartel over rare earths. This is mostly wishful thinking to realize a vision based on Deng Xiaoping's rumored proclamation decades ago that "There is oil in the Middle East; there is rare earth in China."]. Actually, "rare earth" is a misnomer since it is not terribly rare and supplies are found elsewhere in the world, with a sizable deposit in California. But rare earth also has national security implications because some of it is used in precision-guided missiles and so on. The Japanese are already crying foul over China's alleged moves to curtail rare earth exports for the obvious reason that Japan's hybrid and nascent EV industry depend on Chinese supplies.

2. As for the case's claims of massive Chinese subsidies in clean technologies--I assume EVs would be included--well, Washington also doles out subsidies to the same sector: $1.3 billion worth. Most of the Department of Energy's money went to Michigan of course:

Applicant

Amount

Location

Project Type

 

 

 

Cell, Battery, and Materials Manufacturing Facilities

A123 Systems

$249,100,000

MI

Manufacturing of nano-iron phosphate cathode powder and electrode coatings; fabrication of battery cells and modules; and assembly of complete battery pack systems for hybrid and electric vehicles.

Johnson Controls

$299,200,000

MI

Production of nickel-cobalt-metal battery cells and packs, as well as production of battery separators (by partner Entek) for hybrid and electric vehicles.

Compact Power, Inc. (on behalf of LG Chem Ltd.)

$151,400,000

MI

Production of lithium-ion polymer battery cells for the GM Volt using a manganese-based cathode material and a proprietary separator.

General Motors Corporation

$105,900,000

MI

Production of high-volume battery packs for GM's Volt. Cells will be from LG Chem, Ltd. and other cell providers to be named.

KD ABG MI, LLC (Kokam DOW)

$161,000,000

MI

Production of manganese oxide cathode / graphite lithium-ion batteries for hybrid and electric vehicles.

 

 

 

Electric Drive Component Manufacturing Facilities

General Motors Corporation

$105,000,000

MI

Construction of U.S. manufacturing capabilities to produce the second-generation GM global rear-wheel electric drive system.

Ford Motor Company

$62,700,000

MI

Producing a Ford electric-drive transaxle with integrated power electronics in an existing Ford transmission facility.

Magna E-Car Systems of America, Inc.

$40,000,000

MI

Increasing production capacity of advanced automotive electric-drive system component manufacturing plants located in the U.S.


Even if EVs weren't included in the case, this begs the question of whether the Chinese can easily turn the charges around on US government's own subsidies for clean tech and energy. Many governments also subsidize their clean energy producers, so it seems that any case would probably have to strike a delicate balance and tease out what subsidies are "good" and what are "bad" under the WTO.

3. But then again, China isn't helping its case. According to the WSJ:

BEIJING--China's government is considering plans that could force foreign auto makers to hand over cutting-edge electric-vehicle technology to Chinese companies in exchange for access to the nation's huge market, international auto executives say...

...The draft suggests that the government could compel foreign auto makers that want to produce electric vehicles in China to share critical technologies by requiring the companies to enter joint ventures in which they are limited to a minority stake, the executives say...

I haven't seen the draft of this new rule, but the proponent behind it doesn't surprise me. It's the industry management ministry out of which China's industrial policy is executed. And yes, it should be pretty clear by now that China wants more than just partnering with a foreign company, it wants to acquire technologies it doesn't have. Of course, not everyone in China believes that forced technology transfers is the promising path toward a transformative innovative economy--it's just that the industry ministry happens to be the most ardent practitioner of so-called "techno-nationalism." But it has also failed in trying to impose its will, like abandoning the much-derided "Green Dam" Internet filtering software.


If the new rule becomes reality, then the unfair practices it could spawn surely weaken Chinese counter arguments against the USW case. But I suspect the existence of powerful countervailing forces in China (i.e. the "techno-globalists") could well make the Chinese government think twice about engaging in this kind of behavior.

Updates to come when I've got more on all or some of these intertwining issues...

[Finally, since we're talking cars, the traffic situation in Beijing is deteriorating. No, it's not as epic as that traffic jam last month, but apparently a few days ago, 140 roads in the Chinese capital experienced total blockages during peak rush-hour. The photos (Chinese captions) really say it all.]




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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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