Will We See Anti-Competitive Trade Disputes Go Global?

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As the available market for all kinds of products becomes more global, less confined to the once dominant markets of North America and Europe, and as corporations’ fortunes rest on their ability to compete across those global markets rather than just the US or Europe (historically seen as enough to ensure a prosperous future), are we likely to see producers of all kinds of products lobby not just their own trade offices, but maybe their governments to take cases to the WTO?

Take the wind turbine market as an example. Although the world’s largest manufacturer is Vestas of Denmark, US producers were historically not far behind in their home market, but in recent years the global No. 2 and 3 slots have been taken by Sinovel and Goldwind of China as the top 3 increasingly vie for business in emerging markets.

Growth in what is now an $80 billion global market has shifted to developing markets as subsidies have been pegged back in Europe and the US.

The FT reports on how Chinese corporations are taking the majority share of new business as they expand aggressively in developing countries, backed by massive state credit lines (the above two firms have some $5 billion apiece from China Development Bank).

Chinese wind turbine makers secured some 30 percent of global turbine sales last year from almost nothing outside China five years ago, largely achieved by being able to offer better credit terms and undercutting rivals by up to 30 percent, according to the FT.

When they can’t enter a market directly, they buy into domestic manufacturers such as Mingyang, China’s fourth-largest turbine producer by sales, and purchase a 55% stake in Indian group Global Wind Power in order to access contracts to install an ambitious 2.5 GW of wind and solar capacity in India – a 16-fold jump in Mingyang’s current global order book.

Where wind turbine makers are one example, there are many more.

Western producers of automobiles, trucks, railways and even aircraft have not yet seen their dominance threatened, but we often assess these trends over a very narrow time frame; ‘how much more of my market are Chinese producers taking today than they were a year ago.’

Taking a three-to-five year perspective reveals a more disturbing picture. From nothing, many Chinese manufacturers have become global players over a very short time frame. If this was done with simple entrepreneurial skill and spirit, it would be challenging enough, but as with wind turbines it is often done with state support in the form of cheap loans and below-cost pricing.

The next five years will likely see this trend accelerating. Even wage inflation in China, said to be running at 15 percent per year, is unlikely to slow this process anytime soon. Chinese companies still have considerable scope for replacing labor by automation.

The focus of trade disputes may begin to include producers’ activities in global, not just domestic, markets — what a challenging environment that will make.

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