Trade Dispute Will Carry Forward: Chinese Solar Imports Could Face Retroactive Tariffs

Thank you for a good report on not such a positive issue.

Regardless of where anybody stands on the trade dispute axis, we should all be thinking of how we can still make sure that the final customer has the choice they require (whether that be quality or price).

As much of the world seems to be heading into another recession we should not look at limiting cooperation (however much that may be politically alluring) but increase it. The way out of a recession and toward great growth is not through contraction, but through expansion.

The argument, as so often in these cases, is the well being of national industry. True, the US solar industry would fair much better should this petition pass. But what about the US consumer? They would be forced to pay much more for their solar systems. Will that boost demand?

The real winner (apart from a handful of US solar companies) are the traditional energy providers. The losers are everybody else which will face fewer options at higher prices. Not to mention the lag of catching up with an increasingly carbon conscious world.

A final question. How many computer (or flat screen TV's, etc) used in the US are made in the US? The ideas originate there, but the production takes place where it can be made at a cost that is beneficial to the masses. Why should solar be any different?

Welp, I aint real smart but I will speak about this in terms of what I understand as I grew up on a farm in Western North Carolina - at least until I was about 13. I am now working in rural West Virginia in the heart of the billion dollar coalfields on a farmers market where we are trying to develop a competitive market which meets local demand, a demand that seems to be far more complex than simply basing their decision on how cheap the product is. In fact, they seem to gravitate towards a market that helps out their neighbors.

This said, living in a virtual 'food dessert' two of our primary competitors are Walmart and Foodcity but we have found that folks will still pay a premium simply based on the local/quality aspects of the product. We have also learned lessons from the neighboring farmers markets that have unfortunately failed because leaders of the market were obsessed with an ideology of a free-market based on price without fully understanding what the idea means or is intended to do in terms of market innovation.

We have found through our 'free-market' model that if we ensure certain anti-monopoly standards/rules which do not allow for a participant to purchase food from Walmart and resell it at the market below a fair market price - based on returns associated with the direct costs of the producer - that we create the conditions for a vibrant market to emerge that is attracting whole sellers and farmers alike from the surrounding farmers markets.

In the case of this solar debate, I am still not seeing a free-market here? My understanding of the complex series of rules associated with dumping is that they do try to maintain a fair market price that prevents toxic maneuvers such as artificial prices. I think that the courts should decide as we have found with our farmers market. If you want to play, you have to play by the rules.

The petitions assert that Chinese imports of crystalline silicon cells are being dumped into the U.S. market in dramatic proportions. In addition, the coalition has found that Chinese solar cell and panel producers receive a wide range of illegal subsidies from the Chinese government, including:

Massive cash grants.

Discounted raw material inputs such as polysilicon and aluminum.

Heavily discounted land, power and water.

Multi-billion-dollar preferential loans and directed credit.

Tax exemptions, incentives and rebates.

Export assistance grants.

Export insurance at preferential rates.

My point is not whether they did or did not receive subsidies, that is not as clear-cut a thing that politicians would want you to believe (see Thomas Sowell's extensive coverage of this), but what that has meant for the development of the market – it has made solar cheaper for everybody.

Dumping is not something I approve off (and no country is innocent on these grounds –the subsidies mentioned are things that plenty of US industries have and are receiving – why should the terms be different for foreign companies?) but it is also not something that is sustainable in the longer run. You can't run a business on a loss – either the business or the country will suffer then.

But I'd like to bring the focus back to the realities of the marketplace. Choice should be up to the consumer and not up legislators. If you want to buy US (and/or at a premium) then that is your right. If you want to buy foreign made (and/or at a discount, that should equally be your right. The fact that some solar companies have filed for bankruptcy just means they did not have the right product at the right price for the market – tough reality perhaps but those are the facts.

I can only reiterate the example of the computer market. Apple (e.g.) conceptualizes the product in the US but source and produce where it is cheapest. I do not see where the advantage would lie in forcing them to produce in the US. Manufacturing will always take place where total landing cost is the lowest– and that is beneficial for all of us. Western countries will have to rely less on traditional industries and have to be in the forefront of new developments, being the innovation hub of the world if you will. That upgrade is also beneficial to the majority.

@Daniel as far as consumers being hurt because they need to pay true market price in a fair market, I guess that is too bad. Maybe if American computer and TV manufacturers would have done something similar to CASM and got anywhere we would still make stuff in this country and be reaping the benefits. I think if we look at the big picture long term this has far reaching benefits to this country far from solar. This should be a wakeup call that the unfair, and unsustainable Chinese business practices are being exposed for what they are.

@ Daniel

Please provide a clear, concise and concrete examples of your general comments regarding market symmetry in relation to subsides ex: 'the subsidies mentioned are things that plenty of US industries have and are receiving.'

In terms of 'cheaper for everybody' I can think of many examples that this market mantra/ideology has hurt or even destroyed markets, one being the most recent US housing bubble of which we are still feeling the effects. Much like the housing bubble, an artificial price misrepresents the intrinsic value of the commodity thus creating an economic bubble which obscures the very forces that determine price - supply and demand. The 40% decline in prices over the past year may be an indicator of a bubble and may not be entirely associated with market innovation - the accepted theory. It is my understanding that specific subsidies are intended to create short term bubbles only to stimulate the emergence of a new market.

This said, I nor you or perhaps anyone that responds to this article can fairly say that they completely understand the complexity of this present debate and perhaps withholding judgement until all the facts are provided is the best and most wise to do at this moment. Anything else could be understood as mere gossip used to exploit the issue and divert readers away from the facts.

Curious... the same African American economists 'Thomas Sowell' that compared Obama to Hitler? If this is the case, having lived and studied in China myself, the same comparison can be made about the Chinese government, that is, they are fascist in the purest since of the term (i.e., Mussolini's merger of the state and corporations).

Lastly, in terms of your Apple argument. I could not agree more, but computers and solar panels are different technologies and until we begin developing innovative 'soft management' industries for solar (energy in general), this analogy cannot apply at this time.

@Eric-Mathis

Aerospace, Automotive and Oil are a few industries that have and are enjoying subsidies (as previous articles on this site has stated, the subsidies to Oil alone shadow those of Renewable Energy).

Ad hominem attacks are unnecessary I believe. I am not familiar with the quote you mention, but regardless of this possibly distasteful remark (unless it was taken out of context) Sowell´s research on dumping is still a fact and unrelated to this comment.

Let me be clear. I am not in favour of subsidies. Certain innovations need to have support to have the chance to develop to a profitable market. I realize that is an extremely tricky issue. When do you decide to pull the plug? Leave it to long and it will become complacent and slow to innovate. Do it too early and you kill a potential new competitive industry. I do not have the answer. But levying a tax on the consumer I do not believe is the right step forward.

As the saying goes, necessity is the mother of all inventions. The energy sector is a good case in point. Until recently (if even so) it has not been forced to innovate. Consequence: outdated technology that costs more that it could and causes more harm to the environment that it needs to.

Now the facts are that solar has become cheaper. I believe what we are arguing is by which means and what long term consequences that may have. I do not believe anybody can say that, but if we look at other industries, encouraging open exchange has been benevolent for us all.

Very interesting to see how this trade complaint will play itself out. It's understandable that US module & cell manufacturers want their interests protected, as it is understandable that some PV developers/integrators and end users want continued access to inexpensive cells/modules. I think it's important to remind ourselves that the PV industry is one of the main drivers of the 21st century sustainable economy. It must be sustainable in terms of economics, manufacturing, supply chain and environmental stewardship. As US manufacturers must comply with EPA and other environmental regulations relating to manufacturing processes and by-product disposal, it is questionable whether Chinese manufacturers bare similar costs in complying with similar regulations. The recent dumping of toxic chemicals in a river in eastern China by NYSE-listed Jinko Solar (tinyurl.com/3mue7fw), and subsequent heavy handling of demonstrators by riot police leads one to ask questions. Another issue is carbon footprint relating to transportation from the other side of the globe to the US, as opposed to shipping goods locally. USGBC and CaGBC give points for LEED projects when materials used are sourced locally. The question of subsidies remains something for the courts to decide. Subsidies exist in many industries (fossil fuels, agriculture, etc) and can be difficult to unravel, especially overseas, where the books are not exactly transparent.

@Daniel

I could not agree more if I understood you correctly, that is, injecting innovation and open exchange into an age old natural monopoly (i.e., energy sector) is a good thing!!

I would like to note that, at least in theory, the mere appearance of these allegations have already changed the market conditions to where China has probably accessed the market clearing price and fixed their prices accordingly (how they access this is beyond me). That is, if the allegations held any merit.

If this was the case, well done Solar World!! If not, perhaps Solar World should begin adopting the innovative manufacturing designs of some Chinese manufacturers (i.e., in a hyper-localized fashion... raw material in -> solar panels out). Solar World is a bit spread thin in these terms.

Nonetheless, and in response to some of the reactions i have read over this matter, we should all keep cool heads when it comes to solar parity - especially in terms of another thorn in our side, the dirty vs. clean energy debate. We should not be blinded by what I believe should be all of our goals, a sustainable, open and competitive solar market. Its coming and should not be rushed!! To quote Bruce Lee:

"If one loves, one need not have an ideology of love."

Don't you just get a little tired every time the old chestnut of "what will it do to the American consumer" gets thrown into the argument?

If we keep going in the direction of wanting everything at only the world's cheapest prices, then there won't be anyone left in the country to be American consumers.

These free trade investors that spew this junk don't care if companies and manufacturers in the USA have the ability to compete with countries subsidizing dumping products in our marketplace to destroy our industries, jobs, incomes and our future.

This is a trade war being fought and we're losing. The least price we could pay to build our economy is to support our industry and workers and penalize dumpers in any industry and country that tries to get away with it.

This whole tariff thing is a huge problem, and it makes us all look like pussies and poor sports in the eyes of the world.

Allow China to force the prices down, and I believe the projection is something like 1 million Americans going back to to work installing and servicing solar panels to millions of homes.

Stop being so short sighted and sissified. If you can't compete, then become a shoe salesman or something a little bit easier for you. Dumbasses.

BOYCOTT SOLAR WORLD

Once subsidies enter into the discussion the discssion becomes mute.

In the US subsidies refereed to are tax laws only; and thanks to the uneducated claims the tax laws were changed by a democratic congress in 1986 and are available to all industries and affect your 401k and retirement accounts.
Keep in mind we have 50 states with their own tax schedules and laws along with rates for electric, water; health costs;
insurance and other costs

We have one accounting system.

Other countries have there own tax laws and accounting systems and most if not all land is owned by the country and share all rates for electric water etc; so now we are trying to make other countries run their economy to match our economy and adopt our our style of accounting costs and tax laws that differ from us.

Next time you hear business complain that they can not compete and will not expand due to regulation please keep the all of the above differences in mind.

Please from here on out leave the word subsides out of your conversion.

Instead of imposing a tariff on imported Chinese solar panels, why not increase subsidies for US manufactured solar panels? This may not mitigate financial risk for US manufacturers, but it will at least keep prices lower for clients.

jkienzle,
Once our own Solar industry decides to stop stealing our tax breaks and rebates by jacking up the price on solar, we'll be fine with or without subsidies. Millions want it, but it makes little financial sense at current pricing. So, cranking up retail prices by 1/3 and trying to justify it to the public by telling them they'll get 1/3 back in credits is robbery...nothing less. Installation of a 3000w array shouldn't cost $4000 in labor. Don't try to charge me $1.30 per watt for labor because I'm not stupid enough to bite.

So, don't punish China for being good. We just need to get real. Yes, subsidies might help too.

The discussion is totally crap.
It is quite simple:
1. We have sold our technology to China in the blind quest for material;
2. US and European equipment companies only thought of short term profit, hence they focussed selling their crap to China. These guys do not need to devellop anything, since their customers are doing that;
3. Guys like Wacker and Hemlock have created a situation that the cost structure of the PV industry out side China remained at a too high level, aiming for short term profit;
4. Project companies only focussed on short term ROI on installation and have created an undisputed price down turn, killing all non Asiatic industry;
5. We buy multi billion worth of high tech as PV, but why do not we buy their cars????
6. PV in the west is dead, the US has no healthy business attitude in developing a sustainable industry, in Europe over 300.000 people will loose their job due to the dumping of China.
7. When I see the list of US PV producers, I see only companies where China is involved, you have had them infiltrate your business.

I got out of PV since I got sick and tired of the non intelligent business approach, the short term profit objective and the unwillingness to contribute. I learned in my long years a lot of talking and no results.

I wish to you all the best, but you will never succeed remaining just talking and blaming.Do not look at your invoice price, but consider total cost of owner ship.

Yet another example of REW's journalistic standards in evidence: their reporter didn't even get the name of the ITC right. (All it would have required would have been to do a simple Google search). The 'C' in ITC stands not for 'Council' but 'Commission' (in capital letters, please):

http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/2011/cspv_cells_and_modules/prelimphase.htm

As for Daniel Oliveira's assertion that 'plenty of US industries have and are receiving subsidies', that is certainly true, including in respect of U.S. solar manufacturers. In addition to the federal loan guarantees that we all know about, numerous states have -- and continue to provide -- assistance to companies setting up shop in their jurisdictions, either through dedicated green-development programs or through ad hoc 'economic development' deals. As we sometimes see, though, states get into bidding wars. As documented here (http://www.michigancapitolconfidential.com/13704):

"A company that had never manufactured solar modules before used promises of two relatively modest incentives in Texas, one of them $2.8 million from the city of Corpus Christi, in a kind of slingshot maneuver to win a roughly $40 million incentive package to build a solar module plant in Saginaw, Mich."

Yes, staying on-topic, I wonder :
exactly when does a subsidy become grounds for a dumping charge?
when do government loans become grounds? at what interest rate relative to the going rate? What is, for example, Solyndra had been wildly successful internationally? Selling lots and lots of modules does not seem to constitute dumping to me.

From what I know, I don't think the Chinese are playing fair, but all the hyperbole seems a waste of time. What is the data and criteria that will be used to define the possible duties?

I am pleased to see the interest in and discussion of the dumping complaint. I have been reading books on the subject of international trade for a few years now, and I have learned a lot more than I knew from taking an International Econ course thirty seven years ago in college. One thing I know for certain, and all of you probably know, is that America was a protectionist state from the beginning. From Washington and Hamilton's famous policy of nurturing 'infant industies,' to Lincoln, whose protectionist policy helped the Northern economy grow ten times in size during the civil war, and clearly helped win the war. Did you know that the average American tariff
on manufactured goods between 1830 and 1945 was 46%? The great American economist Daniel Raymond described protectionist
policies as the 'American System of Manufactures.' Protectionism is
undoubtedly responsible for America's survival as a state and it's
meteoric rise to global economic dominance and victory in two world
wars. Protectionism is also the reason America was first to the
Atomic bomb.
You should all become familiar with the books 'Bad Samaritans, The
Myth of Free Trade and the Secret History of Capitalism,' and '23
Things They Don't Tell You About Capitalism.' Both books are by a
Cambridge economist of international fame, Ha Joon Chang. You
should also know that virtually all economists admit that the theory of
free trade is deductively, which is to say, mathematically, invalid. There is a growing movement to junk it, and start over. The unhappiness of the middle class with our economic policies is evident in polls, and the anger of large numbers of people is even more manifest in the emergence of the Occupy Wall Street movement. I have become convinced that continuing on our path of deindustrialization, which has clearly contributed mightily to our gargantuan national debt, our high unemployment, and decades of declining wages, will lead to even more catastrophic failure.

Is Solarworld somehow backed by the fossil fuel industry? Seems we need clean energy/independence more than anything. If the USA puts a tariff on Chinese solar imports then what? Price goes up. People buy/install less solar. Result...import more fossil fuels. I just checked with my local NH state energy council member (although I live and work in China), most of NH's energy comes from Coal imported from South America (Venezuela). And, besides that coal is a dirty and non-renewable energy. So I look at it simply. If we tax imports then tax everything the same (Solar, fossil fuels, TV's, computers, Walmart gadgets). Why focus on Solar? Seems this goes back to my opening statement...is Solarworld backed by a fossil fuel lobby?
I work for a Chinese solar company so this makes me somewhat biased. But when I graduated from ASU with a masters in Renewable energy Solarworld didn't hire me, I tried. So I got a job in China where they were hiring. I will for sure loose my job if this tariff goes into place, thus I won't be able to pay for my student loans, or send money back to my parents. This situation effects everyone in different ways for sure...but i can say this. If solarworld gets its ways it won't create that many new jobs. I think more will be lost than created...I have seen many manufacturing solar plants. There isn't many good jobs there unless your in management or above. If you want American made then buy it. You will for sure pay more. If you don't care then buy an import. Not everyone has the luxury of paying double, again that's why people go to Walmart. Its not good or bad it just is what it is.

Dear Geof, I think you are touching a dillema and mix it up with your personnal intrests. I think you should choose the side.
You think you loose your job with some inconvenient side effects, which in my view are marginal. I think Solar world is not backed by fossil fuel industry as I know their CEO in germany as a passionate supporter or renewable energy. This guy earns a lot of respect making this company as big as they are nowadays. The big worry of PV industry (non Chinese) is that about 300.000 people in Europe will loose there job due to the stupid and uncontrolled expansion of the Chinese industry. A lot of knowledge is being lost and I do not see China filling this gap, as they just lack the knowledge at all. I left the PV industry because I got sick and tired of you guys going to work for the wrong side. I had my own fights in the business, and I never have experienced in my 25+ years of business life such a situation and frustration.
May be it was a good decission of Solar world not to hired such a short sighted guy like you. If you are so good, why do not go to USA and try to make some of it rather than submitting such weak messages.

Thanks for the insult Mathieu...am I so short sighted? My basic point to the whole comment was my hopes that more consumers can have clean renewable energy...short sighted? I have an open mind and wonder how 300,000 people in Europe will loose their job? Seems like a huge number. Any place I can confirm that #? How many installers, designers, and retailers will loose their job if price doubles for modules?
Believe me, I wish the world was perfect too but its not, and its not fair either. The energy sector is not a fair playing field no matter the source type. My bottom line is promoting renewable energy, politics aside.
I don't remember saying anything about being so good? My message is a blog like yours, a perspective from an individual in the industry. Sorry I hurt your feelings...and interested to know how you got your perspective.

mathieu, you said...
"I wish to you all the best, but you will never succeed remaining just talking and blaming.Do not look at your invoice price, but consider total cost of owner ship"

You have blamed me in your last blog...have you not?

"May be it was a good decission of Solar world not to hired such a short sighted guy like you. If you are so good, why do not go to USA and try to make some of it rather than submitting such weak messages."

Yikes! That hurts...I have and do contribute to the USA. I installed Evergreen modules on my families house, did research on solar, and built and designed the TUV Rheinland outdoor test facility, promoted Zep Solar& Tigo Energy (American Companies)in China. I am not bragging...its a small contribution but at least I am trying, and currently selling solar energy to people at an affordable price....the system is far from perfect I can see it clearly.
Between you and me I am trying to be part of the solution....quitting like you say you have is not part of the solution.

I wrote the comment recommending the Ha Joon Chang books above. I have one other suggestion. Clyde Prestowitz is a brilliant economist. He wrote 'Betrayal of American Prosperity,' published last year. It's a fabulous book which discusses the flaws of free trade theory. Prestowitz is even better than Chang, as he is American and looks at the problem from that viewpoint. He also discusses the solar energy industry in his book. Wesley Clark and the Tribune wrote great reviews, as did other recognized individuals and publishers.
You will never understand what is going on with China until you read Prestowitz.
You just have to read it!

@dave-fisher

Dave, there are millions of Americans who don't care about America. Since you do, read that book I recommended above. Companies don't care. Politicians don't care. It's up to you, me, and anybody else who does care, and you need to educate yourself.