Solar Trade War Looms As U.S. Considers Tariffs On China
January 30, 2012 Leave a comment
Carl Franzen | January 30, 2012 | Talking Points Memo
The U.S. government hasn’t decided yet whether or not to slap tariffs on Chinese solar panels imported into the U.S., but that outcome is looking more and more likely: On Monday, the U.S. Commerce Department announced it had found “reasonable basis to believe or suspect” that Chinese subsidies of solar panels imported to the U.S. were in violation of international trade agreements.
Further, in an historic decision, the Commerce Department said that when it makes its final decision on March 2nd whether or not to enact tariffs on Chinese solar panel manufacturers, the tariffs will be retroactive for 90 days — requiring Chinese companies to pay drastically higher fees on all of the panels that they’ve imported to the U.S. since December 3, 2011. It’s the first time that the agency has rendered such a decision in advance of making a determination on the actual tariffs.
And in a bitterly ironic twist, a big part of the reason the Commerce Department announced its decision today is precisely because it observed the Chinese manufacturers drastically increasing the volume of imports to the U.S. over the past few months — up nearly 15 percent in the case of at least two companies — following the original complaint from U.S. solar panel companies in October of dumping by Chinese manufacturers.
“Normally in a trade case, when a petition is filed, we see importers back off the market,” said Timothy Brightbill, a lawyer at Washington, D.C. law firm Wiley Rein, who represents the American solar companies that filed the original complaint against the Chinese manufacturers.
“But in this case, by rushing [solar panels] in in an effort to beat the import duties, it only makes things more clear that they were in violation,” Brightbrill added.
Brightbill is counsel for the Coalition For American Solar Manufacturers (CASM), an industry trade group representing seven solar companies, led by German solar giant SolarWorld, which has a North American plant in Hillsboro, Oregon.
The group filed complaints with the Commerce Department and the International Trade Commission (ITC) in October alleging that they had uncovered evidence that Chinese solar panel companies were “dumping” their wares into the U.S. market, that is, exporting numerous solar panels to the U.S. below the U.S. market price, in an effort to force U.S. solar panel manufacturers out of business. The groups said that the dumping margins were “well in excess of 100 percent,” and called for corresponding tariffs of 100 percent.
The Commerce Department and the International Trade Commission have been investigatingover 30 different Chinese solar subsidy programs ever since.
In December, the ITC said “there is a reasonable indication that a U.S. industry is materially injured” by Chinese imports.
Meanwhile, the Chinese government itself is considering opening an investigation into American polysilicon maufacturers — the makers of the raw materials of solar panels — for dumping in that country.
But Monday’s announcement is the best signal yet that Commerce agrees with CASM’s complaint and will likely severely penalize China for violating the World Trade Organization’sAgreement on Subsidies and Countervailing Measures.
CASM could not have been happier with the announcement, seeing as it is exactly what the group asked for just five days ago.
As Gordon Brinser, president of SolarWorld America said in a statement, “We value Commerce’s decision, and we hope that it will send a clear message to the marketplace about Commerce’s commitment to using all of its tools to combat unfair trade.”
But the group isn’t popping the champagne quite yet. In fact, their good news was preemptively doused by a report released just hours earlier by Washington, D.C.-based consulting firm the Brattle Group, which found that the U.S. market could could lose between $698 million to $2.6 billion and up to 60,000 American solar industry jobs if the U.S. government imposes tariffs on Chinese solar panel imports.
The Brattle Group report was commissioned by another, rival American solar industry organization — the Coalition For Affordable Solar Energy (CASE), which doesn’t agree with the dumping claims and has even called upon CASM to drop their complaint entirely, arguing the resulting damage to the overal U.S. solar industry would be catastrophic for consumers and manufacturers alike.
“We cannot allow one company’s anti-China crusade to threaten the U.S. solar industry and tens of thousands of American jobs,” said Jigar Shah, President of CASE, referring to SolarWorld in a statement on Monday.
But CASM lashed back out at CASE, with Brisner saying in a statement “This highly speculative study ignores the illegality of China’s actions and fails to consider the harm those actions have caused to high-tech manufacturing jobs in the solar sector.”
Indeed, Brightbill brushed off CASE’s concerns:
“It’s very common in these types of trade cases, for folks to claim the industry — in this case the solar industry — is going to be severely harmed, that tariffs will set back solar for years and years,” Brightbill told TPM. “The important thing to keep in mind is that this is a legal process. The Commerce Department is simply looking for, one: Is there dumping? Two: Were there subsidies? Three: Has the U.S. manufacturing industry been hurt as a result?”
China is estimated to have subsidized its top five solar manufacturers to the tune of $30 billion in 2010 alone, according to The Guardian. Meanwhile, the U.S. offered subsidies of just over $1 billion to its entire solar industry the same year, according to the Energy Information Administration.
As for some of the specific Chinese companies named in CASM’s complaints, they have continued their policy of “deny, deny, deny.” Chinese company Trina Solar, for example responded to news saying, “We are opposed to any suggestion that our U.S. imports surged as the result of efforts to evade potential tariffs,” and “Further, due to production cycle and delivery logistics, it is an established industry pattern to see the majority of any quarter’s shipments occurring in the last month,” as quoted by Greentech Media.
Still, everyone is on pins and needles until March 2nd, the date that Commerce’s preliminary determination on tariffs is due. We’ll keep you updated on any significant developments before then. Stay tuned.