Choosing Sides: Page 2 of 2

The U.S.–China Solar Trade Dispute
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Coalition for Affordable Solar Energy
Coalition for Affordable Solar Energy
Coalition for American Solar Manufacturing
Coalition for American Solar Manufacturing
Coalition for Affordable Solar Energy
Coalition for American Solar Manufacturing

For the next step, the DOC is working to verify the information reported by the Chinese exporters/producers. The final decision, expected in October, may uphold or modify the preliminary rulings. From there, the case moves to the International Trade Commission (ITC) to determine whether the U.S. solar market has indeed incurred “injury” and whether to support the DOC’s ruling. For now, all duties and tariffs collected are held in reserve. Should the ITC reject the decision, then those monies would be returned to the respective Chinese exporters/producers. If upheld, Chinese exporters/producers can appeal through the Court of International Trade and/or the World Trade Organization.

The Debate

Both sides seem to agree that it took intense competition among manufacturers from many regions to drive mainstream solar market adoption. What they disagree on is if Chinese firms have priced their products fairly and have a legitimate cost advantage over U.S. firms. CASM’s position is that China has used government subsidies and loans from state-owned banks to drive its solar industry “to massively overbuild and sell at dumped prices overseas in an anticompetitive export drive.” The group maintains that China’s unfair pricing caused 12 U.S. manufacturers of crystalline silicon solar cells and/or modules to undergo plant shutdowns, significant layoffs, and bankruptcy filings.

Chinese firms—Trina Solar, for one—say the purchase price of their solar products reflects that which the market sets. As a NYSE-listed company, the company stands by the transparency of its costs, affirming that selling price exceeds costs-per-unit-sold, even under the most conservative accounting definitions, a spokesperson explained.

Central to the fair pricing discussion is China’s 12th Five-Year Plan for the Solar Photovoltaic Industry (2011–2015). The plan lays out the country’s goal to reduce the cost of PV modules to $1.11 per watt by 2015 and $0.79 per watt by 2020. CASM says that prices in the marketplace are already well below this level, suggesting that China is currently not selling at prices that cover its production costs and is benefiting from unfair government subsidies. Critics call China’s plan irresponsible, reasoning that aggressive capacity targets will exacerbate the global oversupply and force more companies to close or scale back operations. Countering this position is the argument that strong companies will survive and low prices will help the industry grow. The People’s Republic of China defends its solar energy strategy as “essential to guarantee energy supply, establish a low-carbon society, promote economic restructuring, and foster strategic emerging industries.”

Another contentious point involves an October 2011 “Solar PV Manufacturing Cost Analysis” from the National Renewable Energy Laboratory. The study found that, without government subsidies, Chinese module producers have a 1% to 2% cost benefit; however, when shipping costs to the United States are factored in, they face a 5% cost disadvantage. Still, some analysts have poked holes in the study’s approach and validity.

Some argue that China’s solar manufacturers are winning because they’re more competitive than their U.S. counterparts. Molly Castelazo, the director of ChinaGlobalTrade.com, sums up the general sentiment: “Blaming China takes the spotlight off U.S. manufacturers and U.S. policy makers—and what they can and should be doing to keep American solar manufacturers competitive in this global economy.”

The Impact?

No one really knows. Both sides paint grim pictures, colored by their own interests. Regardless of which side you favor, there is no denying that the decision could have broad implications. In 2011, China exported $3.1 billion of solar cells to the United States, up from $640 million in 2009, according to the DOC. The total represents more than half of the U.S. market—not surprising since Chinese-made solar products are, on average, 30% cheaper than their U.S. competitors.

The question remains: How will these taxes affect the average consumer? “Consumers shouldn’t be too alarmed,” says Shyam Mehta, an analyst with GTM Research, an independent renewable energy market analysis firm based in Boston. “China-based firms cannot maintain their U.S. prices at tariff-free levels and still be profitable. If the China-based firms were to absorb the tariff, their costs would be close to that of many U.S.-based suppliers. For the short term, China-made module prices will increase slightly in the United States, but this increase won’t have any real effect on demand and installation growth domestically.” (See sidebar for more from Mehta.)

­—Kelly Davidson

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