WTO Backs China in US-China Solar Trade War

The Chinese solar industry now has the heft of the World Trade Organization (WTO) behind them in the spat with the US over solar product tariffs – making Chinese manufacturers and ironically, a large swathe of the US solar industry, very happy. A panel of WTO judges early this week deemed the US guilty of violating global trade agreements when it imposed punitive import duties on a variety of Chinese products, including solar panels, in 2012. (Nothing yet on the new US tariffs launched this year, which pile on the 2012 tariffs, but they surely sense the heated breath of the WTO on their tracks.)

So in case you aren’t familiar, the US slapped punitive duties averaging 31% (in some cases much higher) on Chinese solar products in 2012, on the grounds that Chinese solar cell manufacturers “dumped” their products on the American market below production costs, aided by government subsidies. China subsequently lodged a complaint with the WTO, which has been reviewing the case for almost two years. Meanwhile, China managed to skirt much of the duties through a loophole that allowed them to outsource a step in their production process and skip the tariffs. As a result, the US market continued to occupy a significant share of nearly 14% in total Chinese PV exports last year, as China outsourced cell manufacturing to Taiwan. Just last month the US, after a second round of antidumping and antisubsidy investigations aimed at closing the loophole, hiked the tariffs to 35.2% for Suntech, 18.6% for Trina Solar, and 26.9% for other Chinese manufacturers, with more anti-dumping duties expected on July 25.

Both 2012 and 2014 tariffs were goaded on by SolarWorld, the vengeful American subsidiary of a German solar panel producer who lost a lot of money and closed a factory prior to 2012, due to competition from cheaper panels. However, as most of the US solar industry is actually not in solar panel manufacturing, but in the downstream solar sector (sales, installation, development), the rest of the US solar market suffered from the tariffs, which drove up one of their key costs, solar panels.

SolarWorld pretty much was the unpopular kid complaining about a cheatsheet that helped the rest of the class pass their tests. The rest of the class even formed a coalition called the Coalition for Affordable Solar Energy (CASE), which included more than 90 solar industry players (Elon Musk’s SolarCity one of them) and stated its purpose as, “We all are united in the belief that SolarWorld’s actions will kill jobs in the U.S. economy while raising the price of solar energy … Our goal is to inform everyday Americans, Congress, and the Administration about the profoundly destructive impact SolarWorld’s petition will have on our booming industry.” When Elon Musk, that great heralded enabler of progress, is against you, it’s not exactly a great place to be.

Anyway, as it turns out, China wasn’t providing a cheatsheet so much as a legit study guide. In line with sentiment in much of the world that the US duties were unfair, the duties are now getting knocked down by the WTO’s gavel. In its ruling, the WTO found that the US Dept. of Commerce presented no clear evidence that the state-owned or partially state-owned enterprises passing on the subsidies are “public bodies,” which is a requirement for levying duties under the 1964 Marrakesh accords. The ruling, which included other Chinese products such as steel, also found that the US incorrectly valued the subsidies for Chinese products from kitchen shelving, grass cutters to citric acid. Both parties can choose to appeal the decision, though the process takes several months and duties remain in effect in the meantime. According to analysts at brokerage firm Raymond James, whether the US government chooses to appeal will be a political decision.

The same ruling threw out many of China’s complaints, so it’s not a complete win for China. The overall decision, however, is a strong one for China’s solar industry, the US downstream solar sector, and basically capitalistic principles of competition. CASE applauded the ruling, with its president Jigar Shah stating, “CASE agrees with the WTO that some important parts of the protectionist 2012 US solar tariffs are inconsistent with our trade commitments to others.  Even more importantly, they hurt American solar workers and slow the deployment of clean energy.” Meanwhile, the US Solar Energy Industries Association (SEIA) is hesitant in accepting the ruling, stating that “today’s WTO decision is not expected to impact either the 2012 US solar countervailing duty (CVD) order against China or any new CVD tied to the ongoing investigation until 2016, at the earliest.”

 

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