China flexes trade muscles

Scott Tong Feb 14, 2012

Kai Ryssdal: The lunch menu at the State Department today was roasted sweet potato soup and Alaskan butterfish as President Obama welcomed China’s next leader, Xi Jinping. Also served up were some thinly veiled economic warnings. The president encouraged China to follow the economic rules of the road while Vice President Xi called on Washington to avoid protectionism.

These are touchy days in the Washington-Beijing economic relationship in all its forms. At least two high-profile trade fights are in the works. We’re not talking DVDs or fake iPhones. That’s so today. Think industries of the future, clean energy in particular.

From the Marketplace Sustainability Desk, Scott Tong reports.

Scott Tong: Thirty-eight-year-old Dejan Karabasevic was lonely. He got demoted from his windpower firm American Superconductor. His marriage was bad. Enter Sinovel, an opportunistic Chiense competitor. Sinovel offered Karabasevic a job — twice the salary and female companionship — in return for software secrets. That’s American Superconductor’s story, as it sues Sinovel, which denies the charges.

Windpower and stolen secrets. It’s part of the industry, says Rafael Coven of the research and advisory Cleantech Group.

Rafael Coven: China is probably the most pronounced. And unfortunately the stage and the stakes are so high that it’s extremely common.

U.S. officials have accused Chinese firms of “systematically stealing” American technology. And China’s bad rap is hurting Sinovel, the world’s second-largest turbine maker. It’s trying to go global, but Western countries are nervous to buy from an accused thief.

Energy consultant Trevor Houser is with the Rhodium Group.

Trever Houser: If I’m a Chinese company and I’m only selling to the Chinese markets then there’s not a huge amount of risk to rip off an American firm. If I’m a Chinese company that has to sell in foreign markets, the cost of theft goes up considerably.

A separate case involves solar energy jobs. SolarWorld Industries America says Chinese competitors are selling solar panels illegally cheap. CEO Gordon Brinser says that’s why SolarWorld had to shut down a factory in Camarillo, Calif.

Gordon Brinser: That factory goes back to the 1970s. Some of the pioneers in this industry got their start in that factory there in Camarillo. And unfortunately it was a very difficult decision for us.

If Brinser wins, the U.S. would impose tariffs on Chinese solar panels. They would cost more.

Brinser: There will be upward pressure on prices.

And there’s the rub. If solar gets pricier, the whole industry could struggle to compete with other energy sources, like natural gas. The case could spawn copycat fights in places like Germany and India. And if China fights back, markets could close off — trade war.

Penn law professor Jacques Delisle says everyone’s extra sensitive because this is big bad China, and clean energy is supposed to be the future.

Jacques Delisle: Those are all things that will push that likelihood somewhat higher. If I had to bet, I think there will be some climb down, some compromise, some way out of it before we see a trade war.

Either way, most observers figure trade tensions are a long-term fixture of the relationship, as Chinese firms move up the ladder and take on U.S. companies directly.

In Washington, I’m Scott Tong for Marketplace.

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