2011-12-22 | Editor : John Landers 2129 pageviews

China-US Trade War Could Hurt Solar Industry

On October 19, SolarWorld, a German company with a solar panel manufacturing facility in Hillsboro, Oregon, and 1,000 employees, filed trade violation petitions with the International Trade Commision (ITC) and the US Commerce Department. The complaint accuses the Chinese solar panel manufacturers of antidumping and countervailing trade activities. In particular, Chinese manufacturers dump low-price crystalline silicon solar cells and modules on the U.S. market, unfairly seizing market shares from other companies.

In addition, the company says Chinese companies receive grants, tax incentives, favorable loans, raw material subsidies, and an undervalued Yuan, all unfair trade practices--says the complaint, under international trade rules. Six unnamed co-petitioners also signed the petitions. This group has formed an association called the Coalition for American Solar Manufacturing (CASM).

The CASM  case does not include thin film or other  solar technologies. CASM claims the  “illegal subsidies”  have cost  jobs and  forced seven companies to closed their door or  scale down operations in the last 18 months. From 2008 to 2010, CASM says China has  increased its exports of  solar cells and modules to the U.S. by more than 350 percent. At the end of Q2 2011, Chinese manufacturers imported solar cell and panels  than they did for the entire year of 2010. These trade violations have led to a price collapse of more than 40 percent in 2011.

US-China 2010 Trade Numbers

From a broader perspective, the US-China Business Council reports that China exported $364.9 billion to the United States in 2010 ― a 23.1 percent increase over 2009. For the same period, the U.S. imported $91.9 billon from China ― a 32.1 percent increase over the previous year. In 2010, the solar industry exported $5.6 billionto China, including $3.9 billion in polysilicon and capital equipment. The U.S. solar industry realized a $240 million trade surplus with China and more than $2 billion surplus for the global solar market.

The Chinese economy grows at an annual rate of about nine percent. According to the Council on Foreign Relation(CFR), many Americans have become concerned about China’s growing status in global markets. The country has faced accusations of causing the U.S. economy jobs and keeping it undervalued compared to the U.S. dollar. Other complaints concern violations of Chinese workers rights, which keep prices low and goods selling at unfairly low prices. In turn, these violations promote deflation in the other nations and violate World Trade Organization (WTO) rules.

The CFR contends that China “is not stealing U.S. jobs,” and the country does not engage in unfair trade practices. The CFR points out, “60 percent of Chinese exports to the United States are produced by firms owned by foreign companies, many of them American.”

For example, Conergy owns a 250-megawatt solar panel plant in Germany. Nonetheless, Conergy manufactures most of the brand name modules used in solar installations on the North American continent, in China.

Not all  the U.S. Solar industry support the SolarWorld’s petitions. Conergy North American director Kurt Zwerko says that although the petition has merit, because of the heavy subsidies, inexpensive loans and other favorable state support received by the companies, “But I think it’s probably more of a distraction [than anything else].” Zwerko believes the prices of solar modules will continue to fall and that more manufacturers from Asia will enter the market.

The Korean photovoltaic market has strong support from the Korean government. LG, Samsung, Hanwha and Hyundai Heavy Industries (HHI) already have a presence in the U.S. marketplace. Recently, other Korean companies, such as OCI LST, Osung and Woongjin have ventured into global markets and will eventually make their way to the U.S. This means the oversupply of panels will continue for the near future and more panel manufacturers will shut down operations.

Like their American counterparts, some Asian companies have also faced the wrath of steadily declining cell and module prices. HHI closed one of its Eumseong of its solar panel plants. Last year, 50 solar module manufacturers in China ceased manufacturing.

Opposition to U.S. Protectionism

A coalition of solar module manufacturers, developers, retailers, installers, engineers and solar system owners formed a group called the Coalition for Affordable Solar Energy (CASE). CASE does not support the SolarWorld petition. These American-owned and US-based firms discourage “protectionist” policies.

Alan Epstein, the president and chief operating officer of New Jersey-based KDC Solar LLC  and CASE member said in an interview:  “Competition is good for the U.S. solar industry, good for solar jobs, and most importantly, good for creating and preserving long-term jobs for our electric customers and therefore the economy. The solar industry must remain united in its mission to make solar energy affordable for everyone.”

Kevin Lapidus, Senior VP of Legal and Government Affairs for MEMC’s subsidiary SunEdison and CASE spokesperson points out, SolarWorld represents, at most, 2 or 3 percent of the American solar industry. Furthermore, the company’s petitions not only risk U.S. goals, but also present a threat to the “remaining 97-98% of the U.S. solar industry that is creating jobs and is continuing its progress toward achieving grid parity for solar energy.”

CASE claims the billions of dollars Chinese companies invested in research to gain improvements in solar cell performance and efficiency, as the major reason cell and module prices have declined. SolarWorld and the six companies  have as their primary motive  the exclusion of cheaper Chinese modules from the marketplace, and replace with their more expensive panels.

CASE also states it believes the U.S. solar industry needs innovations and consistent policies to make solar affordable and create a dynamic and profitable solar industry.

Andre Beebe,  Chief Commercial Officer for Suntech “It’s not due to one country or another; it’s due to the extraordinary rush of companies that has taken place over the last couple of years, and it’s led to an oversupply of capacity. It’s been a great time to be a customer of solar, but the inevitable ramification of that is not everyone is going to make it.”

Many industry experts believe a tariff on Chinese modules will cause an increase in the price of electricity and affect 5000 U.S. solar companies. Most of these firms are small businesses and create about 100,000 jobs. In addition, American utility companies have contracted for more than 17 gigawatts of solar-electricity generation and most of these plants require the imported solar modules from China and other importers because of their combined quality and cost-competitiveness.

China’s Response

In a move to the trade complaint, China manufacturer’s plan to transfer some of its solar panel manufacturing operations to Taiwan, South Korea and the United States. If the U.S. imposes a tariff, JA Solar Holdings Co and LDK Solar Co. revealed they would consider moving some production capacity to America. One Chinese manufacturer has sent representative to the State of Oregon twice in late November.

In the past, Chinese companies have been reluctant to open up  solar module plants in the United States because of the strict regulations and time it takes to open factories with  chemical processes.

In response to the possibility of  Chinese solar panel companies setting up shop on American soil, a SolarWorld spokesperson said they would welcome the companies as long as the factories are not “token” final assembly  facilities.

The fear that  China  will counteract any US tariff, occur with Beijing decision to impose an additional duty on certain sport utility vehicles and  vehicles with engine capacity above 2.5 litres. General Motor tariff increased- 22 percent, Chrysler-15 percent and BMW- two percent. Before the  tariff hike, China existing tariff increased the costs of  U.S. imports 25 percent.

China has open investigations into U.S., solar hydro and wind trade practices. They are especially looking at filing a possible complaint with the Commerce Ministry accusing American companies of  dumping  polysilicon on the Chinese market. U.S. polysilicon imports to China totaled  $873 million in 2010, almost equal to the dollar amount of solar panels imported into the U.S.

Conclusion

In recent weeks, the United States and China  have become embroiled in a “tit-for-tat” trade war. The U.S. has asked the World Trade Organization to  rule against  tariffs placed on  U.S. chicken imports. The Commerce Department unveiled duties for high-pressure steel cylinders from China. Now the U.S. may present a case to the WTO for the punitive vehicle tariffs.

In October, the United States Senate passed a bill that allows companies to seek countervailing duties for the goods of countries that keep their currency arbitrarily low such as China.

Many companies and consumers have concerns about the ultimate effect of the trade war on international global solar trade. Semiconductor Equipment and Materials International, a global trade association, released a statement  that said a trade war could “threaten the U.S. solar industry.”

Jigar Shah, CASE co-founder and chairperson said , "Let's put an end to this. There are no winners in a trade war. Every day we fight amongst ourselves, we lose credibility. The only people slapping hands right now are solar industry critics.

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