Obama’s blocking of wind farm adds to U.S.-China tension
The president last week blocked Ralls Corp., which is owned by two executives of a Chinese energy firm, from developing four wind farms in Oregon. The president cited unspecified “national security” threats in blocking the projects (E&ENews PM, Sept. 28).
During an election year in which Obama has faced attacks from Republican candidate Mitt Romney for not being tough enough on China, the president’s decision may heighten worries among Chinese investors that could reduce their future interest in U.S. markets.
“The concern is there’s a feeling in Chinese investment circles that they certainly get special scrutiny,” said Josh Zive, a Washington-based lawyer and lobbyist with Bracewell & Giuliani who tracks international trade issues.
Obama’s decision on the Oregon project comes amid an ongoing investigation into whether Chinese utility-scale wind tower manufacturers have benefited from illegal trade practices
That case also appears to have a national security component, as the coalition of American wind manufacturers that brought the complaint has argued in filings with the Commerce Department that one of the major Chinese tower producers is part of China’s military enterprise.
“There are similar national security implications relating to the imports of the towers, not just the operations of the wind farms,” Alan Price, chairman of the trade practice at the Washington, D.C., law firm Wiley Rein, which represents the coalition, said today. “There are a number of national security implications in the Chinese government’s targeting of wind and other green energy projects.”
The Obama administration issued a preliminary ruling in that case earlier this summer finding that Chinese and Vietnamese manufacturers of steel towers used in utility-scale wind turbines have been selling their products in the United States at less than fair value. The Commerce Department set tariff rates of 20.85 percent to 72.69 percent to counter dumping practices by Chinese producers, while tariffs on Vietnamese manufactures were set at 52.67 percent to 59.91 percent.
For China, the dumping tariff comes on top of tariffs Commerce imposed in late May after the agency found the government had provided improper subsidies to its domestic wind tower manufacturers. That rate ranged from 13.74 percent to 26 percent.
That case isn’t scheduled to be finalized by Commerce and the U.S. International Trade Commission until early 2013.
The conflict over Chinese and Vietnamese wind towers comes as a group of U.S. solar manufacturers have argued for heavy new import duties on cheap Chinese solar panels. That case is entering its final stages this month and will feature a much-anticipated hearing before the International Trade Commission this week. In response, China has already launched several counterinvestigations into the U.S. solar industry.
Obama’s decision to block the Ralls projects came after a review by the Committee on Foreign Investment in the United States, which issued an order earlier this summer effectively blocking the project. Ralls had challenged the CFIUS order in court, prompting a need for Obama to take the rare step of making the final decision on the case.
Delaware-based Ralls is owned by two executives of the Chinese firm Sany Group, which manufactures turbines that were to be installed in the four wind farms. All four locations are within or in the vicinity of restricted airspace used by the Naval Weapons Systems Training Facility Boardman, according to government court filings.
Ralls’ lawyer says the company will challenge Obama’s decision in court and believes it has been unfairly singled out because the area where its projects are planned already has scores of operating turbines.
“The selective and arbitrary singling out of Ralls’ project drives our effort to seek redress in U.S. courts,” Ralls counsel Tim Xia said in a statement after the president’s decision.
“Ralls Corporation will continue to uphold and protect U.S. national security interests, and confirm its profound faith in the rule of law,” Xia continued. “We are confident that the courts will vindicate Ralls’s rights under the law and the Constitution and we intend to pursue the remedies that the law makes available.”
‘National security considerations’
Legal experts say Ralls will face an uphill battle in court, as judges generally defer to the president when it comes to national security concerns.
Judge Amy Berman Jackson, who is hearing the challenge to the CFIUS decision in U.S. District Court for the District of Columbia, said at a hearing last month that she “can’t review the president’s decision if he stops it” because of the deference afforded to presidents on national security decisions, Bloomberg reported at the time
Ralls challenged CFIUS’s initial order under the Administrative Procedure Act, arguing that the agency’s decision was arbitrary and capricious in part because it “offers literally no evidence or explanation” for its determination that the wind farms would endanger national security.
Obama’s order from Friday and a statement from the Treasury Department, which chairs CFIUS, also do not specify how the projects would endanger national security, aside from their proximity to the naval facility. A Treasury Department spokeswoman, Natalie Wyeth Earnest, said she could not elaborate due to “the obvious sensitivity of national security considerations.”
Ralls was aiming to complete the project before the end of this year, in time to claim a $25 million investment tax credit ahead of its expiration, according to court filings. The company also claims it already had agreed to relocate some towers to accommodate concerns that had been raised by the Navy and notes that the Federal Aviation Administration had certified that the wind farms would not be a hazard to air traffic in the area.
The Treasury Department said last week that blocking the Oregan project was done to protect national security and doesn’t undercut the United States’ broader support for open investment in U.S. markets.
But China’s state news agency blasted the Obama administration in the wake of last week’s announcement for reneging on its stated commitment to maintaining free and open markets and fighting protectionism.
“During this election year when the U.S. economy is mired in tepid growth and high unemployment rate, both Democrats and Republicans are using China-bashing tactic to woo some blue-collar voters,” a Xinhua News article posted on China’s Ministry of Commerce website says.
The article says Chinese officials will take their objections to the World Trade Organization.
“Through consultations within the WTO trade dispute settlement mechanism, the Chinese side hopes the U.S. can correct its wrong-doing and properly deal with concerns from China,” Shen Danyang, spokesman for the Ministry of Commerce, said at a recent press briefing, according to the article.
Some U.S.-based observers also worry about a chilling effect from the Ralls and related cases.
“The decision … will unfortunately be seen as yet another signal — this time from the highest possible level — that the United States does not really want Chinese investment,” Edward Alden, a fellow at the Council on Foreign Relations, wrote in a blog post. “And for an economy still struggling to create jobs, that’s the wrong signal to send.”