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China Rejects U.S. Solar Tariffs as Protectionism

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Reposted from the Product Design and Development blog

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Joe McDonald  |  October 11, 2012  |  Product Design and Development

China Rejects U.S. Solar Tariffs as Protectionism

China demanded Thursday that Washington repeal steep tariffs on solar panels that Chinese producers fear will shut their equipment out of the American market.

The tariffs upheld Wednesday by the U.S. Commerce Department add to financial pressure on struggling Chinese solar panel manufacturers that are suffering heavy losses due to weak demand and a price-cutting war.

“The United States is inciting trade friction in new energy and sending a negative signal to the whole world about protectionism and obstructing the development of new energy development,” Ministry of Commerce spokesman Shen Danyang said in a statement. It gave no indication whether Beijing might retaliate.

“We hope the U.S. side will correct its erroneous action with early termination of the trade remedy measures,” Shen said.

The Commerce Department upheld charges of 18 percent to nearly 250 percent on Chinese solar panel producers to counter what it said was improper subsidies by Beijing to the industry. For some companies, charges are lower than preliminary tariffs announced in May.

A spokesman for one of China’s biggest panel producers, Yingli Green Energy Holding Co., said tariffs of about 30 percent imposed on that company would make sales to the United States unprofitable. He said gross profit margins in the solar industry are about 10 percent.

“A tax rate of 30 percent is the same as 200 percent. Both of them mean the door is closed for exporting to the United States,” said the spokesman, Wang Shuai. “No one does business to lose money.”

Yingli and other leading Chinese manufacturers including Suntech Power Holdings Co. and Trina Solar Ltd. have rejected accusations they were selling goods at improperly low prices.

Foreign competitors complain Chinese solar manufacturers get improper government support in the form of low-cost access to land, bank loans and other resources. Beijing acknowledges giving research grants and tax breaks but says those are in line with its free-trade commitments and practices by other governments.

The dispute highlights tensions over whether China’s government-dominated economy should be treated as a free market. Beijing has pressed the United States and Europe to officially grant such status, which would make it harder to bring some dumping and other complaints, but none of its major trading partners has agreed.

Trina Solar said earlier that solar cells or other components affected by the duties could be replaced with components from other countries for shipments to U.S. customers.

In Yingli’s case, though, Wang said all of its manufacturing is in China, which means it cannot immediately replace U.S.-bound solar panels with products made elsewhere.

The tariffs come at a critical time for Chinese solar panel manufacturers, which have reported hundreds of millions of dollars in losses this year.

The Chinese solar panel industry grew rapidly over the past decade as Germany, Spain and some other countries promoted renewable energy with subsidies and low-cost loans.

China’s communist leaders declared solar power, along with such fields as biotechnology and aerospace, a “strategic emerging industry” targeted for development as part of efforts to transform China from a low-wage country of farmers and factory workers into a creator of technology.

Hundreds of Chinese companies began producing solar panels, which flooded the market and drove down prices to unprofitable levels.

Companies also face possible European trade action.

In July, a group of 25 producers of solar gear including companies from Germany, Italy and Spain filed an anti-dumping complaint with the European Union.

The latest U.S. tariffs were imposed in response to a complaint by a group of companies led by Oregon-based SolarWorld, the largest U.S. maker of silicon solar cells and panels. Some American companies that opposed the probe warned China might retaliate against U.S. suppliers.

Chinese solar equipment manufacturers warned earlier that sanctions could result in a loss of American jobs because U.S. companies are both buyers of Chinese products and suppliers of materials. They said Chinese manufacturers spend some $2 billion a year to buy materials such as polysilicon from U.S. suppliers.

Beijing responded to the investigation by launching its own probe last November into whether U.S. government support for producers of wind, solar and other renewable energy technology is an improper trade barrier.

In August, the Commerce Ministry ruled that U.S. support for six clean energy projects violated free trade rules and called on Washington to stop but made no mention of possible penalties.

5 Responses to “China Rejects U.S. Solar Tariffs as Protectionism”

  1. Dan DiFabio says:

    The Chinese denounced U.S. tariff measures as protectionism. That is utterly comical in view of the fact that China uses multiple protectionistic measures. China imposes VAT taxes and tariffs on U.S. imports. China gives free factories to companies. China manipulates its currency,and it subsidizes multiple industries. U.S. suppliers of polysilicon will not lose 2 billion dollars per year. They have nothing to worry about. U.S. suppliers of polysilicon will be able to sell polysilicon to existing U.S. solar panel manufacturers and the new U.S. solar panel companies that will sprout up.

  2. Will Wilkin says:

    China has a sovereign right to manage their economy and trade as they choose. American problems should not be blamed on China, since doing so assumes American free market ideology should be adopted around the world, an arrogant and ahistorical fantasy.

    A better approach for the USA would be to take the controls of our own ship by introducing an industrial policy coordinating all our policies –trade, tax, public investment, regulation of labor and environment, education– around ON-shoring those industries that will be key to 21st century prosperity. Instead of blaming China, it is time for American leadership to muster another “we will put a man on the moon” moment, only this time let’s make a goal of converting the USA to 100% renewable energy use on technologies made in the USA.

    The total set of inducements to industry to ONshore mfg here amounts to corporate welfare to the extent that we must compete with other countries offering inducements. That is the first half of jettisoning the free market mythology paralyzing our country from competing. But in oder to not become the fascist system of total corporate-govt partnership on behalf of the rich, we need to also bring labor to the table. Of course there is no labor movement to speak of anymore, but we could start by bringing full employment economists to the cabinet so the prosperity of a revitalized America can be democratized and available to all our citizens.

    In a “free trade” context the corporate welfare approach could lead to total destruction of our labor and environmental standards, which is why protectionism and a wide array of trade management mechanisms need to be ready, so we can balance the needed inducements to ONshoring with the needed democratization of opportunity and prosperity.

    • China Watcher says:

      If we simply get into a bidding war for the relocation of businesses, we are bound to lose. Other governments have deeper pockets than we. Only a coordinated approach that combines trade policy and all trade-related domestic policies will prove effective, just as Will says. At the same time, we can and we must not only blame China for any violations of the rules on currency, subsidies, intellectual property and much more, but we must use the rules relentlessly to achieve the results they can deliver. Above all, we need to shun any false choices and strive for strategic coherence in pursuit of a clearly defined national purpose.

  3. Tom T says:

    I think this article clearly shows the problems with “free trade” when countries have differing underlying market structures. Communist China can and does subsidize its producers in various ways (so does the U.S.) to get the business and jobs that demand creates (demand creates jobs, not the wealthy–they just invest to cater to that demand).

    Some would argue that the U.S. must counter China’s industrial policy by doing what they do even better— that is to subsidize manufacturing. As we follow these type of policies we move further and further from a free market economy to one that is managed by government. The efficiencies of free markets and the allocation of resources to those investments becomes inefficient.

    In this industry it seems that China able to do multiple end runs around any U.S. response (democracies much slower than totalitarian governments). Here is an article that shows the real problem:

    http://www.csmonitor.com/USA/2012/0320/China-subsidized-solar-panels-US-finds.-Are-tariffs-the-right-response/%28page%29/2

    In this global war for manufacturing jobs, China has been able to out fox the U.S. with the aid of the “free traders” and their propaganda, ironically pushed by the Fox News Network. The U.S. labor force has taken the brunt of the damage of this and the sum of other actions by China. Capital has enriched itself at the expense of labor as they have used their economic muscle to arbitrage the U.S. labor force to the lowest common denominator–and all with a super low capital gains tax provided by U.S. politicians.

    China is only acting just as the largest corporations act in the United States—they use national policy to edge out “free markets” and its price signals to win in capturing dollars and manufacturing jobs.

    Tom T.

    • Mo says:

      Tom gold is the solution that could have prevented what has happened today with all the redistribution of wealth that has occurred. If the US never left the gold standard, it would have forced the US not to import too much more than it exports because as gold was drained it would have forced action like higher interest rates to encourage more savings to reduce imports and higher tariffs on countries that were devaluing their currency with the intent of exporting their unemployment.

      If we had sound money backed by gold then the terms of trade would be different. Today because of the wasteful money printing, the US winds up exporting factories, jobs, transfering technology and trades ownership of US companies to import consumer goods pay for financial speculation, wars and overseas military bases. The terms of trade today clearly show capital consumption. Technically all trade is balanced trade because you have to trade something to get something which in the US case it exports the cow for milk which is a horrendous terms of trade.

      I strongly recommend reading the two readings linked below:

      Gold: The Protector and Creator of Jobs
      http://www.goldstandardinstitute.com/Article.aspx?UniqueName=HSP20120420

      To see in charts the connection between inflation and manufacturing job losses check out the document linked below starting from page 36.

      http://www.fame.org/Publications/Dr.%20Lawrence%20Larry%20Parks%20-%20FAME%20-%20TESTIMONY%20BEFORE%20THE%20US%20HOUSE%20COMMITTEE%20ON%20FINANCIAL%20SERVICES%20112th%20Congress.pdf

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