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What goes around, comes around: China takes EU to WTO for local content quotas on renewable power

| November 6, 2012

China notified the WTO on November 5 that it would like consultations with the European Union on certain renewable power policies that could violate WTO rules. (Consultations are the first step in the dispute settlement process at the World Trade Organization.) I'm tempted to feel sorry for the EU but hey, what goes around, comes around. Actually I do still feel sorry for them, and for us, because local content should be encouraged, not declared an illegal component of, efforts to fight climate change.

The Chinese government "alleges that certain measures affecting the renewable energy generation sector relating to the feed-in tariff programs of EU member states, including but not limited to Italy and Greece, include domestic content restrictions and are inconsistent with the GATT 1994, the Agreement on Subsidies and Countervailing Measures and the Agreement on Trade-Related Investment Measures."

According to Reuters, "Days after warning that it could put punitive tariffs on European Union exports of solar-grade polysilicon, a key raw material for solar power, China said Italy and Greece broke WTO rules. The two EU states offered a higher electricity price to solar power producers that used mainly locally sourced components, it said."

Gee, I wonder where China got the idea that local content quotas are illegal? Ah yes, possibly from the EU and Japanese WTO challenge to local content requirements in the Ontario Green Energy Act. Canada has apparently lost this dispute, according to a leaked preliminary ruling. We expect a final, public ruling of the dispute panel in that case later this month, at which point Canada has the option to appeal, which we hope (and will insist) they do.

The WTO decision in the Ontario case was bound to trigger a new wave of complaints against green energy policy globally, as the rapid Chinese complaint against feed-in-tariff regimes in Europe proves. We should use the opportunity to question why the WTO should have a final say on what types of renewable policy are legitimate or not given the current jobs and climate crises affecting much of the world.

China is a big exporter of solar panels, wind turbines and related technology. Many European, Japanese and American firms also produce their renewable power modules in China to keep labour and other costs down. But Europe-based producers have been complaining that Chinese (over)production is subsidized, leading to dumping into the European and U.S. markets.

Meanwhile, places like Ontario, Italy and Greece that are facing big job losses in manufacturing are looking for ways to encourage green production closer to home. Local content requirements are (or were) one of the last ways a government could actually do that under the rules of corporate globalization. The WTO and many governments and business lobby groups call this "green protectionism," a transparent attempt to demonize any climate measures that don't involve buying expensive green technology from established European or U.S. firms.

Though the U.S. joined the EU and Japan at the WTO to gang up on Ontario's green jobs strategy, not everyone south of the border agrees with the Obama administration's hypocritical position (ahem, Buy American).

"Ontario's [feed-in-tariff] is designed to achieve the twin goals of reducing greenhouse gas emissions which cause climate change and transitioning to a clean-energy economy. These laudable goals are also shared by the Obama administration," wrote U.S. labour and environmental groups in a letter to the USTR on October 18. "We believe it is imperative that governments have the flexibility to put in place policies to address these goals, and that trade rules not undermine such efforts."

The letter, which was endorsed by ActionAid USA Center for Biological Diversity, Center for Food Safety, Center for International Environmental Law, Communication Workers of America, EcoEquity (USA), Friends of the Earth U.S., Global Exchange, Greenpeace USA, Institute for Policy Studies (Global Economy Project), Public Citizen's Global Trade Watch and Sierra Club, supported the Green Energy Act despite the local content requirements.

"We are interested in better understanding your views on this matter, especially given that the U.S. government also requires policy space to enact green-energy programs that combat the climate crisis and promote the development of our green-energy economy. We request an opportunity to discuss this matter further with you," said the organizations.

As I've written before, if you live in Ontario, despite the political uncertainty (and maybe even benefiting from it), please write to your local MPP to say you support the Green Energy Act and hope the province insists on an appeal at the WTO if a final decision does come down against Canada.

The existence of local content requirements in Italian and Greek renewable power policies further undermines the EU position in the Canada-EU free trade negotiations that Ontario should completely cover renewable power policy and provincial agencies under rules that will ban local preferences forever. These measures are far more valuable to provincial governments than the insignificant new market access Canadian firms will see into the EU market from any deal, no matter how "ambitious" the Harper government claims it will be.

Municipal governments such as Toronto, Hamilton, Mississauga and Brantford should also retain the space to encourage local, sustainable development through public spending on energy and other infrastructure projects. More than 40 municipalities across Canada have passed motions demanding they be excluded from procurement rules in CETA that would forbid this internationally common practice, putting Canadian communities at a huge disadvantage.

To find your MP's or Ontario MPP's contact information, click here.

To help pass a CETA resolution at your local or municipal council, click here.

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