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Another Volley as US-China Trade Battle Intensifies

China's Ministry of Commerce on Thursday said that after a months-long investigation it has ruled that the United States government broke World Trade Organization rules by supporting six renewable energy projects through unfair grants.

The department didn’t say what the projects were or whether it would impose any punitive measures. According to the Associated Press, an earlier announcement of the investigation indicated the probe would cover wind, solar, hydro and other renewable energy technologies for projects in Washington, Massachusetts, Ohio, New Jersey and California.

Tensions between China and the United States have been running high in recent months, and last week Beijing officials accused the Obama administration of “protectionism” following a 31 percent anti-dumping tariff it slapped on Chinese-made solar cells imported into the growing American market. The dispute over clean energy is far-ranging and it underscores the huge potential both countries see as they jockey for leadership in innovation, manufacturing and generation.

Recent legal battles include America’s push to ease China’s grip on rare earth minerals. The nation controls 97 percent of global production for minerals that are vital to everything from wind turbines to electric vehicles. The U.S. Department of Commerce is also investigating a trade complaint filed in December from domestic wind tower manufacturers against Chinese and Vietnamese manufacturers. The petitioners, which include Trinity Towers, DMI, Broadwind and Katana Summit, is looking for countervailing duties and anti-dumping tariffs of 64.37 percent for China and 59.11 percent for Vietnam.

And companies on both sides of the Pacific have done battle over intellectual property. The biggest dispute has been between China’s Sinovel, which has been accused by American Superconductor of stealing technology.

Perhaps the issue that has loomed as the most immediate potential retaliation from China is over polysilicon trade. Fear of backlash from China’s central government was a concern even before the trade complaint was filed in October. Then in November, China’s polysilicon suppliers filed a case accusing American producers of dumping their product into China.

According to Solarbuzz, China is the world leader in polysilicon production at 40 percent with the U.S., Germany, Korea and Japan making up the collective majority. China, though, uses that polysilicon to make 76 percent of the world’s solar wafers. Because of this high-volume wafer production, companies like America’s Hemlock, Germany’s Wacker and Korea’s OCI pump much of their product into the China market.

Chinese customs data, according to Solarbuzz, shows that in February and March of this year, tonnage of American polysilicon imported by China more than doubled the rate seen over previous months. That’s because the price dropped rapidly since the end of last year, making it the cheapest option. In March, that price was $4.4 per kilogram less than the average import price.

From there, the story looks familiar. Domestic producers have stopped or severely cut back production because of the falling prices, and they are asking their government to intervene. It’s impossible to say whether the recent DOC ruling will weigh into China's decision, but it certainly won’t help American polysilicon producers keep access to the world’s largest market.

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