China could plead environmental necessity to win a dispute over its wind industry subsidies, a case now moving through the World Trade Organization, one legal expert suggests.
Provisions under Chinese law mandating that nearly all wind power equipment be purchased from China for projects to be eligible for state financial support are facing a WTO challenge by the United States.
The domestic content requirement that helped China build a wind industry at the expense of foreign firms does, on the face of it, seem to violate WTO rules against such protectionist measures, experts say. But the WTO panel and appellate body have explicitly shown in the past that they will allow exceptions for environmental protection.
And if Beijing could convince the trade body that the domestic content requirement is necessary to help curb global climate change, the WTO board may toss out the U.S. complaint, said Robert Howse, an international law professor at New York University and an expert on international trade law.
"I think in China's case in particular, there might be a plausible argument, which is that China's demand for clean energy is so enormous that it would be irresponsible for China not to take measures to ensure it has an adequate domestic industry in this area," Howse said.
The law professor admitted that his judgment is speculative at best -- China hasn't yet publicly stated what its defense of the foreign product block is. But given the rules in the various international treaties the WTO governs that allow for exceptional state support for efforts on environmental problems, China's trade negotiators may be looking for loopholes among those provisions, he said.
Howse acknowledges that the facts of the case as known so far don't lend credence to this argument. "I think it's fair to say that under the subsidies agreement, there's a reasonable prima facie case that China will have violated that agreement," he said.
However, he argued the Chinese authorities may be able to keep the support for domestic manufacturers in place and continue to block imports of wind equipment from the United States and Europe if they can prove there's a compelling environmental reason for the subsidies.
It would amount to China proving that the climate change problem is so huge that it requires the country to develop a complete domestic wind industry supply chain that doesn't have to rely on foreign inputs to tackle rapidly growing greenhouse gas emissions rates.
"China has good grounds, environmental grounds, for wanting to ensure its security of a domestic supply of alternative energy technologies in the future," said Howse.
The argument seems to be that in order to achieve a particular policy goal (i.e., environmental protection), there needs to be domestic production of the product at issue (wind power equipment). Therefore, protectionist measures which encourage that domestic production are justified.
I've often wondered how this kind of argument would do. Can it ever be the case that protectionism used to develop domestic production would be considered "necessary" to protect human, animal or plant life or health under GATT Article XX(b), or "related to" the conservation of exhaustible natural resources under Article XX(g)? And if it were, would this be "arbitrary or unjustifiable" discrimination under the Article XX chapeau? Are the circumstances Rob describes (the size of the climate change problem) sufficient to satisfy Article XX?