Superpowers not getting along..
U.S. Plans Inquiry on China’s Subsidies of Clean Energy
By SEWELL CHAN and KEITH BRADSHER
Published: October 15, 2010

The Obama administration announced Friday that it would investigate a complaint accusing China of illegally subsidizing its clean-energy industries, in another sign of its newly assertive posture over China’s trade and commercial policies.

The action came as the Treasury Department announced that it would delay its semiannual report on foreign-exchange rates, deferring a decision on whether to brand China a currency manipulator. The report was due Friday, but the Obama administration has been pressing China to allow the value of its currency, the renminbi, to rise, so the delay allows those negotiations to continue.

A Treasury statement “recognized China’s actions since early September to accelerate the pace of currency appreciation, while noting it is important to sustain this course.”

Treasury Secretary Timothy F. Geithner has become more pointed in his criticisms of China, warning recently that China had set off a “damaging cycle” of “competitive nonappreciation” in which countries are aiming to block their currencies from rising in value.

In its statement Friday, the Treasury said that “by continuing to implement reforms to strengthen domestic demand and by allowing the exchange rate to move higher to reflect fundamental economic forces, China will make a significant positive contribution to the global rebalancing effort, help reduce pressure on those emerging market economies that have more flexible exchange rates, and provide a more level playing field for trading partners around the world.”

The currency dispute is likely to be a top subject when leaders of the Group of 20 economic powers gather for a summit meeting in Seoul, South Korea, in November.

On the trade subsidy challenge, the United States trade representative, Ron Kirk, said his office would investigate a complaint filed by the United Steelworkers, the nation’s largest industrial union, on Sept. 9. The complaint asserted that China had violated its obligations under the World Trade Organization, which China joined in 2001, by supporting manufacturers of wind and solar energy products, advanced batteries, energy-efficient vehicles and other goods.

“This is a vitally important sector for the United States,” Mr. Kirk said. “Green technology will be an engine for the jobs of the future, and this administration is committed to ensuring a level playing field for American workers, businesses and green technology entrepreneurs.”

Mr. Kirk added that the government took the union’s claims “very seriously,” adding, “we are vigorously investigating them.”

The Commerce Ministry press office in Beijing was closed on Friday night when the American announcement came out. Calls to a ministry spokesman and to the press office of the Chinese Mission to the W.T.O. were not answered.

The administration plans to complete the investigation within 90 days and, if a complaint is warranted, to pursue litigation against China through the W.T.O.

Under American trade rules, the United States is supposed to request consultations with the Chinese government to discuss the complaint. But Mr. Kirk’s office said it would delay that request for up to 90 days in order to “seek information and advice” from the steelworkers and other parties.

The United Steelworkers and the American Iron and Steel Institute, a trade group, both issued statements in support of the action.

“President Obama showed again today that fighting for U.S. workers and their jobs is his top priority,” the steelworkers union said. “He’s backed up his commitment to a clean energy future by making it crystal clear that that future is going to benefit all Americans.

The administration’s announcement on Friday drew a skeptical welcome from one prominent Democrat: Senator Charles E. Schumer, the leading advocate of legislation in Congress that would threaten China with retaliation if it does not allow its currency to appreciate more quickly against the dollar.

“The Obama administration is treating the symptom, but not the disease,” said Mr. Schumer, a New York Democrat. “An investigation into China’s illegal subsidies for its clean energy industry is overdue, but it’s no substitute for dealing with China’s currency manipulation. Democrats and Republicans alike in Congress are prepared to move legislation confronting China’s currency manipulation this year. We hope to have the administration’s support, but will go forward without it if necessary.”

The House of Representatives voted overwhelmingly last month to threaten China with tariffs on a broad range of Chinese exports to the United States.

The lead example of unfair Chinese trade practices in the United Steelworkers’ petition involved China’s restrictions on the export of rare earth minerals and two other obscure minerals, tungsten and antimony. China dominates the worldwide mining of all three, producing 95 percent of the world’s rare earths and somewhat smaller percentages of global tungsten and antimony production.

China has halted virtually all exports of rare earths to Japan since Sept. 21, to the anger and dismay of Japanese manufacturers, who have been the biggest customer for rare earths and use them to make everything from mobile phones to hybrid gasoline-electric cars like the Toyota Prius. A trickle of rare earths is now reaching Japan because of smuggling.

The statement from the Office of the United States Trade Representative on Friday morning conspicuously omitted any mention of rare earths. People who have discussed rare earth policy with American trade officials said earlier this week that before taking action on rare earths, the Obama administration wants to see the initial decision in mid-February of a W.T.O. panel reviewing cases filed last year against China by the United States, the European Union and Mexico involving China’s export restrictions on a half dozen other industrial minerals, like bauxite.