China Solar Trade War
Obama to Support Attack on China Economic Prowess
American solar manufacturers have asked President Obama to impose massive taxes on China’s solar panels because they allege the Chinese government heavily subsidizes production and dumps them into the United States at prices so low they’re almost impossible to compete with.
We got word today that Obama is planning on supporting these manufacturers.
This case, filed last year, has done nothing to help the growing rift in trade relations between China and the US.
According to American producers, Chinese corporations receive many different subsidies ranging from below-market loans from state-owned banks to subsidized polysilicon which help drive down their operating costs. This has resulted in Chinese corporations' share of the market growing from 11% in 2009 to 40% in 2011.
China’s largest manufacturers Suntech Power Holdings (NYSE:STP), Trina Solar (NYSE:TSL) and JA Solar Holdings (NASDAQ:JASO) get about 20% of their annual sales in the United States, second only to Europe.
“We’re already dependent on the Middle East for our oil. We cannot become dependent on the Far East for our renewable energy,” president of SolarWorld Industries America, the stateside branch of Germany’s largest solar manufacturer SolarWorld AG.
This all coincides with Obama declaring last week he wants to see wind turbines and renewable energy technologies made in the United States, not abroad.
According to reports, the US Commerce Department will start the pushback by issuing anti-subsidy duties on Tuesday with anti-dumping duties in mid-May.
These duties could add up to more than 20% anti-subsidy on the imports, which rose from $1.2 billion in 2010 to $2.8 billion in 2011.
Some Chinese companies are starting to set up operations in the United States and Taiwan in order to escape some of the punitive tariffs, Suntech setting up in Arizona in 2010 being one of the earliest. One method of escaping the tariff is ‘cell tolling,’ a process in which a Chinese company provides its products to Taiwanese companies so they can be packaged at solar panel plants at other locations.
American companies have been lobbying the government to close these loopholes, but so far nothing has been done.
So what's the bottom line on all this?
Once again, the Chinese are kicking our asses because we refuse to level the playing field and put the kibosh on billions of dollars worth of fossil fuel subsidies year after year.
You really don't need to worry about high-priced solar panels if the true costs of fossil fuel production were figured into the price and not subsidized, courtesy of the American taxpayer.
But when those industries freely roam the halls of Congress, doing deals and ponying up filthy lucre in the form of “campaign contributions,” what else can you expect?
So instead of dealing with the real problem – an economically unsustainable energy economy facilitated by special interests, we cry about the Chinese being unfair. As if the U.S. has never heavily subsidized anything in an effort to get a leg up. Give me a break!
Meanwhile, as we seek revenge on the Chinese for playing the game better than anybody else – solar installers, which account for tens of thousands of U.S. jobs, could end up losing business as these higher panel prices will certainly be passed along to the consumer. Brilliant!
Want to know how this debacle could end up?
Check out this response from Jigar Shah, founder of one of the most successful solar integrators on the planet, Sun Edison. . .
“We cannot allow one company's anti-China crusade threaten the U.S. solar industry and tens of thousands of American jobs.”
Shah has been very outspoken on this issue, and earlier this year offered a pretty solid argument to the Managing Director of Cleantech Research at AURIGA Securities. Take a look:
"I write to you not from one trading desk, but representing the 1,000 or more rooftops where I have deployed solar.
I write to you representing more than 97 percent of the U.S. solar industry. These are the people who have not only visited factories where solar panels are manufactured, but who have actually worked in those factories, and many more who have worked assembling, installing, and maintaining solar systems.
At a trading desk, one is managing portfolios, trading prices of commodities like solar panels and more. You may even be concerned about the cost of silicon chips used in computing (but we are not complaining about the low cost of silicon chips manufactured outside the U.S. in this dialogue).
Every day, we, the actual people who work in the solar industry, are interested in growing the deployment of solar, particularly at a cost that creates grid parity, location by location. More importantly, we are interested in preserving and growing the 100,000 American jobs in the industry, which, according to the 2011 National Solar Jobs Census published by the Solar Foundation, grew 6.8 percent between 2010 and 2011 -- nearly ten times higher than the national average employment rate
of 0.7 percent.
Real jobs. Real people. Using real tools.
By the way -- on the theoretical stuff, many of your colleagues disagree with you and might provide you with a bit of insight and education. See below:
Photon Consulting: “Overall, trade restrictions between the U.S. and China will destroy value in the global PV sector. Equally important, imposition of artificially higher prices for solar consumers would undoubtedly slow the adoption of solar power in key markets such as the US.”
Jefferies: “The U.S. solar industry, already suffering from a lack of financing, will experience higher module prices and lower demand if countervailing duties are imposed as early as March 2012.”
Axiom: “There is simply more supply than there is demand," Johnson said. "It's very simple economics." And it's not the Chinese's fault, Johnson said: "You can't complain because a guy is beating you," Johnson said.
AEI Research: “Higher module prices are likely to lower the excess return, putting solar energy at risk of losing years of economic potential as a result.”
SEMI: “This case could lead to significant price increases that could have a significant deleterious impact on SEMI members, many of whom are upstream providers of high-value-added equipment and materials. It will also impact downstream service providers, such as installers, where a majority of solar industry jobs are concentrated."
Certainly, there's a better way. But it seems like no one in Washington has the stones to do anything but bitch and moan about how “unfair” China is.
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