Barriers to free trade such as incentives, subsidies, pricing rules, quotas and local-content requirements are consumer-harming, market-distorting, protectionist, competition-quashing and unfair constrictions on beneficial economic growth.
Unless, of course, they happen to work in favor of something we like — American jobs and workers or American companies.
The U.S. isn’t shy about calling out other nations on trade practices seen as harmful to U.S. interests. Just in the past week the U.S. filed notice with the World Trade Association that it’s launching a trade-dispute proceeding “regarding China’s domestic support measures in the agriculture sector.” The measures concern domestic support allegedly provided by China for agricultural producers of, among other crops, wheat, Indica rice, Japonica rice and corn.
That follows the finding from the International Trade Administration, a unit of the Department of Commerce, that antidumping duties should be imposed on imports of stainless steel sheet and strip from China. That case is not to be confused with a separate one involving carbon and alloy steel cut-to-length plate, also from China.
But other countries and businesses within them aren’t reluctant to go to the WTO and their own trade authorities with complaints about U.S. trade behavior.
When they do, Washington often winds up in the middle of those disputes. That’s partly because of the trade-dependent nature of the state’s economy and the products produced here. Washington is a major wheat-producing state, and most of what it grows goes to the export market; much of the Upper Midwest’s wheat goes to market through ports such as Tacoma. Thus the China ag case is of considerable interest here.
But sometimes Washington finds itself in the middle of these cases because of what it’s doing — like encouraging residents to buy made-in-Washington solar systems.
That’s the crux of a WTO case filed this week by India, in which it “requested consultations with the United States under the dispute settlement system regarding alleged domestic content requirements and subsidies provided by eight U.S. states” for renewable energy systems, according to a WTO release. Adds one account in an Indian publication, India contends “the measures are inconsistent with the global trade norms because they provide less favorable treatment to imported products than to like domestic products, and because the subsidies are contingent on the use of domestic over imported goods.”
And what state heads the list of the naughty eight? Washington. How proud we must be! The other alleged offenders, by the way, are California, Montana, Massachusetts, Connecticut, Michigan, Delaware and Minnesota.
There’s no disputing that Washington gives a competitive advantage to locally made solar-system components. According to a summary from the group Solar Washington, Washington residents who install a photovoltaic solar system get a production incentive of 15 cents per kilowatt-hour produced. If that system has a made-in-Washington inverter (which converts DC to AC current), the incentive is bumped to 18 cents per kilowatt-hour; using panels made in the state provides a 36-cent incentive. Systems that use panels and inverters made in Washington qualify for an incentive of 54 cents. The program is due to end in 2020.
Washington solar component manufacturers also qualify for a reduced B&O rate, but that doesn’t appear to be a part of India’s case.
As often happens in trade disputes, India’s filing would appear to be payback for a WTO case the U.S. lodged against India over, you guessed it, local-content rules for solar-system rules.
India’s “request for consultations” is the WTO’s bureaucratic phrasing for “let’s get ready to rumble.” Consultations “give the parties an opportunity to discuss the matter and to find a satisfactory solution without proceeding further with litigation” and after 60 days India can request a hearing by a WTO panel.
Don’t expect any immediate resolution. The U.S. filed its case against India three years ago, and it’s still dragging through the process.
For that matter, Boeing and Airbus have been spatting for more than a decade over subsidies given to both companies; incentive programs the state of Washington set up to encourage Boeing to keep aircraft assembly in this state figured prominently in several chapters of that saga.
Today it’s wheat, airplanes and solar panels; tomorrow it’ll be those plus something else, because that’s how global trade and local politics intersect. No politician wants to be seen as not standing up for the hometown worker, who also happens to be a voter. So the dispute will cool off (they never seem to go away entirely), the participants will pledge to abide by the rules — and then they’ll get right back to work figuring out how to carve out an advantage over the other guy.
Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at email@example.com.