Will Tariffs Help America’s Struggling Solar Industry?
On November 7, the United States International Trade Commission voted unanimously to issue anti-dumping and countervailing duties on imports of solar panels from China. The decision comes after nearly a year of preliminary investigations, decisions, and appeals aimed at determining whether or not the imports materially injured the solar industry in the U.S.
The ruling works off the idea that Chinese solar manufacturers are able to sell panels below the cost of production because of government subsidies. This dramatic price suppression is what advocates of the duties like SolarWorld AG and the Coalition for American Solar Manufacturing claim drove dozens of American solar companies out of business.
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The “unanimous vote by the International Trade Commission confirms what has been apparent in the marketplace for the past two years — Chinese manufacturers, with the enthusiastic support of the Chinese government, have attempted to game the international trading system in order to gain a virtual monopoly on solar cells and modules sales in the U.S. Market,” CASM said in a statement.
The ITC report on the ruling notes that imports from China accounted for 57.4 percent of U.S. crystalline-silicon photovoltaic module consumption in 2011.
“With this relief, combined with an aggressive domestic enforcement regime, there is hope that the United States can maintain a viable solar manufacturing base,” said CASM.
American solar manufacturers such as First Solar (NASDAQ:FSLR) and SunPower Corporation (NASDAQ:SPWR) have seen their share prices drop by over 82 percent and over 68 percent this year to date respectively.
CASM called out LDK Solar (NYSE:LDK) and Suntech Power Holdings (NYSE:STP) by name in their statement. LDK Solar and Trina Solar Limited (NYSE:TSL) have both dropped over 7 percent in afternoon trading. Suntech, the largest Chinese solar manufacturer, is up slightly. The company may have mitigated losses by issuing a statement condemning the ITC ruling.
“The continued growth of trade barriers represents a serious challenge to the U.S. solar industry, for American jobs, and for energy consumers globally. SolarWorld’s hypocritical campaign has forced the fast-growing American solar industry to foot the bill for SolarWorld’s competitive failures,” says the statement.
CASM, for its part, claims on its website that Chinese dumping of solar panels caused a 40-percent world-wide collapse in prices in 2011, forcing 12 plants to shut down and eliminating 2,000 jobs. CASM points out that an analysis by the National Renewable Energy Laboratory found that Chinese manufacturers only have a 1 to 2 percent labor cost advantage over American manufactures. Considering shipping, Chinese solar exports should operate at a 5 percent price disadvantage, meaning current pricing would necessarily be illegal under World Trade Organization rules.
Suntech’s response continues, “Further damage can be prevented if governments engage in constructive dialogue to roll back protectionist barriers that limit our industry’s ability to compete against fossil fuels.”
The Commerce Department has said that it will issue tariffs largely between 24 and 36 percent.
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