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Sino-US Solar Trade Dispute Set To Escalate

by Mike Godfrey,, Washington

09 June 2014

On June 3, in the teeth of opposition from the Chinese Ministry of Commerce (MOFCOM), the United States Department of Commerce (Commerce) made a preliminary decision to impose further anti-subsidy countervailing duties (CVDs) against imports of solar products from China and Taiwan, with anti-dumping duties also expected to be announced next month.

The value of US imports of solar cells from China increased from USD639.5m in 2009 to some USD3.1bn in 2012, provoking US rulings in December 2012 that imposed duties averaging about 31 percent on panels made from Chinese solar cells.

However, it was alleged at the end of last year that Chinese companies have been avoiding those duties by assembling panels from solar cells produced elsewhere, especially in Taiwan, even if those cells are put together from components originating in China. A petition by SolarWorld America Industries, Inc., the largest manufacturer of solar power systems in the US, stated that China is therefore still continuing to sell below production cost in the US market to seize market share.

Commerce has now imposed a ruling which assesses tariffs of up to 35 percent on those imports of solar products, while also expanding the categories of solar products subject to duties. Anti-dumping duties are also expected to be announced next month.

SolarWorld praised Commerce's decision as a "strong win for the US solar industry." With the allegation that government subsidies enable Chinese producers to sell at artificially low prices, Mukesh Dulani, its President, said that the company "looks forward to the end of illegal Chinese government intervention in the US solar market."

Others in the renewable energy sector have not been convinced, and have pointed to the future effect on the US solar market. Environmentalists are disappointed with this decision because lower cost solar panels would make solar energy more competitive compared with fossil fuels. They have noted that more US jobs could be created on the installation side if solar panel uptake increases.

The Coalition for Affordable Solar Energy (CASE) responded to Commerce's decision by stating: "We are deeply disappointed in the preliminary determination ruling on CVDs. The ruling is a major setback for the entire US solar industry, because it will immediately increase the price of solar power and cost American jobs in one of fastest-growing sectors of the US economy."

While pointing out that Commerce was disregarding legal precedent on country of origin and substantial transformation trade rules, CASE added that "this is a global dispute that will not be resolved through litigation alone. The best path forward continues to be a negotiated settlement between the US and Chinese governments (as has been achieved in a parallel Chinese dispute with the European Union)."

MOFCOM had reacted furiously to the original duties, expressing "serious concern" that they highlighted a tendency for trade protectionism within the US, and that "the US was provoking trade friction in the new energy market."

Already, in January this year, in an apparent response to SolarWorld's new petition, MOFCOM had confirmed the final determination of significant duties on imports from the US of solar-grade polysilicon, a main raw material in the production of solar cells, with the Chinese industry said to have suffered "substantial damage."

In addition, while China and the US conducted several rounds of consultations since May 2013 to resolve trade frictions in the solar sector, negotiations to resolve the matter have stalled. While expressing its "strong dissatisfaction" with its latest decision, MOFCOM now foresees that "the abuse of trade remedy measures" by Commerce is bound to lead to "an upgrading of the Sino-US solar dispute to another level."

A MOFCOM official argued that "the frequent trade remedy measures taken by the US solar industry cannot solve its development problems," and hoped that the US would "terminate the investigation procedures as soon as possible to create a good environment for the promotion of competition in the global solar industry."

In the meantime, he confirmed that China "will pay close attention to the progress of the case, and reserves the right to take measures to safeguard the legitimate rights and interests of the Chinese photovoltaic industry and related businesses."

TAGS: environment | Energy | tax | business | energy | tariffs | anti-dumping | China | Taiwan | manufacturing | trade disputes | United States | import duty | trade | Other

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