Feud with West raises tariffs on solar panels
Chinese decision a blow to U.S.
Escalating a long-simmering trade dispute with the West over solar panels, China plans to impose tariffs that could exceed 50 per cent on a material it imports from the United States and South Korea to make the panels, its Ministry of Commerce announced this week.
The decision, which goes into effect next week, is a blow to the U.S. industry, which analysts say is China’s largest customer for solargrade polysilicon, the main ingredient in solar panels.
The Obama administration and the European Union have been trying to negotiate settlements with China in the world’s largest anti-dumping and anti-subsidy trade cases.
Last fall, the United States put in place tariffs of roughly 24 per cent to 36 per cent on the Chinese imports after finding that Chinese companies were benefiting from unfair government subsidies and selling their products below the cost of production, a practice known as dumping.
In June, the EU imposed modest tariffs of 11.8 per cent on solar panels from China, but those are set to rise to 47.6 per cent in August if Beijing does not stop what the Europeans say is dumping. Soon after, Beijing said it would investigate whether European wines had been sold at below cost in China.
U.S. trade officials declined to say how China’s move might affect those negotiations but expressed disappointment. A spokeswoman for Michael Froman, the U.S. trade representative, said they were in discussions with China related to global issues in solar technology, including panels and polysilicon, and this step did not move the ball forward, “but we will continue to engage.”
China dominates the world market in solar panel production, exporting about $30 billion a year in panel shipments to the West, but it imports a majority of polysilicon from the United States, Europe and South Korea. Its decision to tax U.S. companies heavily but levy lower rates on some Korean producers and leave Europe out is being widely seen as retaliation for the U.S. trade case, which was originally brought in 2011.
“China is slapping tariffs on polysilicon, because it is unhappy that the United States exercised its legal rights and stood up for our remaining solar manufacturers,” said Sen. Ron Wyden, chairman of the committee on energy and natural resources, whose home state of Oregon is a centre of solar panel production. “I am confident that these retaliatory tariffs will be shown to be without merit.”
The tariffs are preliminary and could be changed or even eliminated if the United States were to successfully challenge them with the World Trade Organization, said Timothy C. Brightbill, a lawyer representing the companies that brought the U.S. trade case, adding that the process could take a year or two. That could prove too late for the domestic polysilicon business, industry officials say.
“It’s a big setback for U.S. poly, because the duties are going to start being collected next week and the rates are prohibitive,” said John Smirnow, vice-president of trade and competitiveness at the Solar Energy Industries Association, the main industry trade group. “It could effectively act as a bar to U.S. polysilicon exports to China in the short run. They’re losing their largest export market.”
Whether that will help or hinder Chinese companies is unclear. Globally, panel manufacturers have been squeezed, some to the point of bankruptcy, by China’s rapid expansion of its production capacity over the past four years. That has drastically reduced prices and fed a boom in solar development, but now companies worry that an increase in the cost of raw materials could make it more difficult to compete.
At the same time, the U.S. tariffs might not raise the cost of panel production by much, at least not in the long term, said Shayle Kann, the head of GTM Research, a unit of Greentech Media. U.S. exports of polysilicon have been declining — to about $700 million in 2012 from worth roughly $1 billion in 2011, says a commerce department official — as China develops its own production.