No US company would seem to have more to gain than General Electric (GE) from US President Barack Obama administration’s decision on Wednesday to accuse China, in a WTO case, of providing illegal subsidies to Chinese wind turbine makers.
Like other multinationals, GE acquiesced a few years ago to the Chinese government’s demand that it build a large wind turbine factory in China — only to then watch its market share plummet as China’s state-owned power companies steered contracts to homegrown wind turbine manufacturers. And now GE faces growing competition from those Chinese upstarts in its home market, the US — even as a crucial GE wind turbine patent is about to expire.
But with so much to potentially gain from the administration’s WTO case, what was GE’s reaction? Total silence. The company said it would have no comment on the matter.
GE’s silence is part of a broader Western corporate reluctance to criticize Chinese policies, particularly in public. So eager are multinationals for continued access to the world’s fastest-growing market that they are loath to cry foul even amid evidence that China may be flouting international trade laws.
That reticence has long characterized foreign companies’ dealings with the ascendant China, but last winter and spring, there were signs of a new willingness by US and European multinationals to speak out.
Google said in March that it would shut down its China-based Internet search engine, rather than continue allowing Chinese censorship. The leaders of big companies like GE, as well as German giants Siemens and BASF, voiced concerns in early summer about access to the Chinese market.
It briefly seemed that Western companies might take a more coordinated and more assertive position.
BUTTONING UP
However, that season of outspokenness seems to have passed and virtually no companies are now willing to discuss the Chinese trade barriers publicly, said executives and lobbyists in Beijing, Hong Kong and Washington.
“We’re seeing a lowering of the volume — that doesn’t mean the concerns have gone away, but the volume has come down,” said Christian Murck, the president of the US Chamber of Commerce in China.
China’s rebound from the global economic downturn, compared with continued malaise in the West, has made the Chinese economy look like a much better place for Western companies to pursue near-term opportunities — instead of fighting drawn-out trade and regulatory battles. It can take up to three years for a WTO case to wend its way through a dispute resolution panel and any appeals.
Moreover, assurances from Chinese leaders that they will give equal treatment to foreign enterprises, although not yet backed up with specifics, have also persuaded some foreign companies that conditions will eventually improve. This has eroded whatever fragile consensus that had been starting to form in favor of speaking out against Chinese policies.
In fact, corporate leaders like GE’s chief executive, Jeffrey Immelt, have taken a more conciliatory public stance toward China in recent months, saying they would fine-tune their competitive tactics to adapt to Beijing policy. Experts on Chinese business culture say that Chinese regulators like to see such statements.
“It’s communicating, ‘I understand my place’ — that’s very Confucian,” said Judy Lam, a lawyer at Rutter, Hobbs & Davidoff in Los Angeles who specializes in deals spanning the Pacific.
The statements show, she said, that “the big American giant” is “willing to suck it up — that will win them points.”
After the Obama administration announced its decision to pursue the trade case, the Chinese Ministry of Commerce denied in a brief statement on Thursday that the country’s wind energy policies had violated WTO rules.
HELPING HAND
Many countries help their clean energy industries, usually by subsidizing consumers who buy solar panels and other renewable energy equipment. Beijing’s approach to clean energy subsidies has drawn criticism from trade experts because it is based on helping manufacturers localize production in China and begin exports.
And yet, no Western company was willing to file a trade case. It was the United Steelworkers, a US labor union with no sales to lose in China, that complained in September to the Obama administration, which opened a formal investigation in October.
GE and other US clean energy companies have avoided taking positions on that investigation. The only big company to step forward and strongly endorse it has been SolarWorld, a German company with solar panel manufacturing sites in Oregon and California, but not in China.
The United Steelworkers’ trade case alleges dozens of violations by China.
The Obama administration filed a WTO case on only one of those issues on Wednesday and said it was still investigating the rest, but needed more time to do so, partly because it had not yet been able to gather all the information it needed.
“The pace and content of our investigation will depend in part on the role played by stakeholders, including manufacturers and service providers in the green technologies sector, in sharing evidence and other relevant information,” said Nefeterius Akeli McPherson, a spokeswoman for the Office of the US Trade Representative.
A Washington lobbyist for a wide range of corporations said that with sales barely growing in the US and Europe, Western companies were particularly dependent on China for growth and inexpensive manufacturing. Retail sales in China are climbing nearly 15 percent a year.
“At the end of the day, they have to make their numbers,” said the lobbyist, who insisted on anonymity because of the wariness of companies that he represents.
RETALIATION
The lobbyist added that many companies also feared retaliation by Chinese regulators. Chinese laws are often just a few pages in length, even on complex industrial or financial subjects. That leaves broad discretion to regulators on enforcing regulations that may help some companies and penalize others.
Regulators also have the authority in every industry to approve foreign investments and even demand a say in details like what equipment will be purchased by foreign investors for their factories. Regulators have long used their involvement in the minutiae of corporate management, and their ability to delay even minor decisions, as a way to discipline companies for taking stances at odds with Chinese policy.
“They have shown themselves to be retaliatory and it really has the intended effect,” said a Western lawyer who advises many multinationals in China and who insisted on anonymity because he said that he feared retaliation.
US policymakers almost never have the same discretionary powers to reward or penalize companies based on their cooperation or lack of it. Some executives in China working for Western multinationals advocate taking a tough line in their negotiations with Chinese officials, but they say the reluctance of other companies to take public positions means that united action is extremely difficult.
The result, one senior Western executive said in an e-mail, is “everybody eating bitterness in solitude.”
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