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US-China Solar Trade War Enters Second Round

Jan 24, 2014

Just days after China finalized anti-dumping tariffs on U.S. makers of polysilicon, the main ingredient used to make solar panels, the U.S. has announced it is opening a new anti-dumping investigation into solar panels imported from China. The close timing of this latest round of developments in a solar trade dispute between the U.S. and China may look worrisome on the surface, especially if they had come a year ago. But in this case the solar signals seem less confrontational to me, as both Washington and Beijing finally realize the sector is too important for the world’s energy security to jeopardize with more trade wars.

All that said, it’s still important to look at these two latest solar signs and what they might mean. To quickly recap, the dispute began about two years ago when the U.S. accused China of providing unfair state support to its solar panel makers, and ultimately imposed anti-dumping duties on Chinese-made products last year. China retaliated by opening its own anti-dumping investigation into U.S.-manufactured polysilicon, the main ingredient used to make solar panels. All of this was happening as the sector underwent a major downturn that is only now beginning to ease.

Against that backdrop, China announced this week it would impose punitive anti-dumping tarrifs against U.S.-manufactured polysilicon, finalizing an earlier decision and bringing its investigation to close. The duties were rather high, ranging from 53 to 57 percent, and will undoubtedly price many U.S. makers out of the market. But the move was largely expected and didn’t contain any major surprises, after the U.S. levied its tariffs on Chinese-made panels last year.

Meantime, a newly announced investigation by the U.S. seeks to close a loophole in the first round of anti-dumping tariffs imposed last year. That loophole allowed Chinese companies to avoid the U.S. tariffs if other countries supplied them with solar cells, the central component used to make finished solar panels. The U.S. arm of German panel maker SolarWorld said earlier this month it was petitioning Washington to close the loophole, and now the U.S. Department of Commerce andInternational Trade Commission (ITC) have said they are launching a new investigation.

The ITC will announce its findings by February 14. If it determines that the Chinese companies are still receiving unfair state report, the Commerce Department could issue preliminary decisions on the matter in March and June this year. A new round of tariffs would deal a blow not only to the Chinese manufacturers, but also to Taiwanese companies that have become one of the main suppliers of solar cells being used in the finished Chinese panels to avoid U.S. tariffs.

So, why am I cautiously hopeful that this latest investigation won’t be as contentious as previous ones? Most importantly, I have to believe that the ITC and Department of Commerce knew about this loophole when they made their initial decision last year. Thus they must have felt at the time that panels made with cells from Taiwan and other countries weren’t receiving unfair support from Beijing.

Secondarily, I also believe that Washington may be tiring of this current trade war with Beijing, especially as both sides realize the importance of solar power to their future energy security. China has recently embarked on its own major campaign to build up its solar power sector, and the US has been trying to boost solar power now for several years. A continuation of this trade dispute won’t benefit either side, and would probably hurt the chances of western solar panel makers to win big contracts in the Chinese solar build-up. Accordingly, I’m cautiously hopeful that the ITC will return a negative finding next month in this latest investigation, which would send a positive signal that Washington wants to quietly end this ongoing solar spat.

Bottom line: A negative finding by the U.S. in its latest anti-dumping investigation into Chinese solar panels would help to bring its clash with Beijing to a close and promote development of the important sector.

This blog was originally published on Young's China Business Blog and was republished with permission.

Lead image: Boxing gloves via Shutterstock

The information and views expressed in this blog post are solely those of the author and not necessarily those of or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters, writing about publicly listed Chinese companies. He currently lives in Shanghai where he teaches financial journalism at a leading local university. He also writes daily on his blog, Young’s China B...


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