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China Violating WTO Regulations

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The United Steelworkers union has brought a legal action against China, accusing the country of violating WTO rules regarding export subsidies, as they relate to equipment used to produce clean energy.

If you've ever taken even a cursory glance at the WTO guidelines (which I've just spent the better part of three hours doing in an attempt to make heads or tails of the Steelworkers case), you know the feeling I have right now--slightly dizzy, overwhelmed, a bit anxious, and very, very tired. As a point of perspective as to just how complex this stuff is, consider that the United Steelworkers filing alone is more than 5,000 pages long. Which is exactly why it would be a fool's errand to so much as attempt a not-even-really-moderately-detailed analysis beyond what has already been reported in the news--that China is not keeping up its end of the bargain, vis-a-vis allowable government assistance under the latest WTO regulations outlined in the "Agreement on Subsidies and Countervailing Measures" which "addresses two separate but closely related topics: multilateral disciplines regulating the provision of subsidies, and the use of countervailing measures to offset injury caused by subsidized imports."

So, here it is: essentially, people are pissed because China, which joined the WTO (which actually has one hell of an art collection) 10 years ago, isn't playing fair by giving companies that manufacture solar panels, wind turbines, and so forth, land grants, low-interest loans, etc. This is making it hard, if not  impossible, for the US and other countries, to compete in the green energy sector.

What strikes me as the real news here is that people actually seem surprised that the Chinese are cheating. When a communist country that makes--and has always made--only the thinnest of thinly-veiled excuses for its wholesale disregard of free market policies plays unfair, how does this come as a shock to anyone?

Back in June, Richard McCormack of Manufacturing & Technology News pointed out that "Most all of the predictions from those pushing the deal [for China's entry into the WTO] at the time have proven to be wrong, according to an analysis done by Robert Lighthizer, former deputy United States Trade Representative during the Reagan administration and head of the international trade department of the Washington firm of Skadden, Arps, Slate, Meagher & From LLP."

He noted that Bill Clinton, speaking at a press conference on March 29, 2000, said that granting China permanent normal trade relations "would be a great deal for America."

"We do nothing," Clinton said. "They have to lower tariffs. They open up telecommunications for investment. They allow us to sell cars made in America in China at much lower tariffs. They allow us to put our own distributorships there. They allow us to put our own parts there. We don't have to transfer technology or do joint manufacturing in China any more. This a hundred-to-nothing deal for America when it comes to the economic consequences."

What a difference a decade makes.

McCormack wrote:

"Since 2000, the trade deficit with China has surged by 173 percent, from $83 billion in 2000 to $227 billion in 2009. The United States has lost more than one-third of all its manufacturing jobs -- 5.6 million; U.S. wages have declined; the country has suffered a financial meltdown; it has spent $14 trillion on economic stimulus, only to experience the highest unemployment rates in generations and annual federal budget deficits of more than $1 trillion. These trends are not "likely to end," says Lighthizer."

China's done it again. Are you shocked? I'm certainly not.
POSITION:  No positions in stocks mentioned.