The U.S. decision on Chinese solar panel imports:
Why tariffs are only a partial solution

Time:3/16/2012 3:21:59 PMLarger Medium SmallerSource:| Climate Progress

Many U.S. solar-installation companies fear that import tariffs will erode their profit margins, slow industry growth across the value chain, and make it even harder for solar energy to compete with traditional fossil fuels

By Melanie Hart and Kate Gordon

The U.S. Department of Commerce early next week will issue a preliminary verdict on a trade petition filed by SolarWorld Industries America, Inc. That petition alleges that the Chinese government unfairly subsidizes crystalline silicon photovoltaic solar cells and modules by providing cash grants, tax rebates, cheap loans, and other benefits designed to artificially suppress Chinese export prices and drive U.S. competitors out of the market.

As a remedy, SolarWorld wants the Commerce Department to levy import tariffs to alleviate damage from these artificially cheap panels on solar-panel manufacturers in the United States. At first glance this would seem to be a reasonable solution. A sustained look yields the same conclusion. But it is important to understand the dynamics of the U.S. solar-panel market—where our labor skills and ability to innovate are strong but where demand for solar panels is low due to the lack of any national commitment to lower carbon emissions or to diversify our sources of energy—to comprehend why import tariffs are not the only solution.

Indeed, this petition, along with a second action brought by SolarWorld accusing China of “dumping” its cheap solar panels into the U.S. market, has generated major controversy in the fledgling U.S. solar industry. Just about everyone seems to believe that Chinese officials are probably violating trade rules in this sector but there is substantial disagreement over what, if anything, the United States should actually do about it.

Our current trade institutions address illegal subsidies by levying import tariffs on imported subsidized goods. In theory when trade partners artificially suppress prices and export those underpriced goods to the United States, import tariffs should level the playing field by raising prices back up to natural market levels. In theory these tariffs are lowered over time and finally eliminated as the trade partner phases out its subsidies.

In the current case SolarWorld alleges that the Chinese government uses dumping and a variety of subsidies to artificially suppress solar panel export prices by a margin of at least 100 percent. SolarWorld has asked the Commerce Departm

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