International trade and competitive advantages in the costs of production in China have brought numerous opportunities for China’s exports but also generated challenges due to protectionism from its foreign competitors. Consequently, there have been numerous trade cases against China, including anti-dumping, anti-subsidy, in many economic sectors. The very current trade case involving China is the US accusing Chinese manufacturers of dumping photovoltaic (PV) panels in the US market and the Chinese government unfairly subsidizing its own solar industry. In fact, the US’s trade balances in polysilicon products between both the US and China, and the US and the world significantly deficit while China’s polysilicon cells and modules production has increased dramatically (The Kearney Alliance 2012). This essay claims that, the surge in PV exports does not necessarily mean that the Chinese government has subsidized its PV manufacturers illegally, and Chinese solar manufacturers’ low prices do not necessarily imply they are selling their PV products below the cost of production. Importantly, imposing such significant imports tariff is highly likely to undermine not only the bilateral trade between two countries but also long-term benefits of both countries.
First, this essay provides an overview of the US-China PV trade case; then explains why China solar industry has been growing dramatically; and finally it analyses what the consequences might be if the US imposes a countervailing and antidumping tariff on China’s PV.
On October 2011, seven US-based PV manufacturers headed by SolarWorld Industries America reported China on a double-anti case to US Department of Commerce (DOC) and US International Trade Organization (ITO). The seven manufacturers, which later formed Coalition for American Solar Manufacturing (CASM), accused China for dumping their PV module products to US market and giving a huge amount of export subsidy to this industry which in turn causing severe injuries to US PV manufacturers. Several investigations have been carried out by both DOC and ITC for this issue, as the coalition accused China government providing cash grants, heavily discounted resources, huge loans and credits, tax exemption, incentives and rebate and export grant insurance to the industry. In its final determination held on 10 October 2012, DOC proposed 18.32 per cent to 249.96 per cent of anti-dumping and 14.78 per cent to 15.97 per cent of countervailing duty. Further actions, including issuing or not issuing anti-dumping and countervailing duty orders, will be made after ITC final determination (US DOC 2012).
Photovoltaic industry is a new emerging industry as a response to the threat of energy shortage and environmentally-unfriendly fossil fuel-based energy. Governments issued supportive policies, including giving significant account of subsidy considering higher production cost of this new energy industry compared to that of conventional one. In case of China, the country issued a PV market policy in 2007 that included deployment, investment and research and development supports under the scheme of middle and long term program of renewable energy development set by National Development and Reform Commission (NDRC) targeting the energy of 300MWp by 2010 and 1.8 GWp by 2020 of PV cells installed (Grau et al. 2011). This policy and its comparative advantage on labors result in excessive growth of China PV industries, making China’s world market share skyrocketing from 1 per cent in 2001, 5 per cent in 2005 to 50 per cent in 2010. In 2012, four of the top five PV producers are Chinese overtaking US manufacturers which occupy 27 per cent in 2006, decreased to 5 per cent in 2010 of the total world share (The Kearney Alliance 2012).
Why has China’s PV grown so big so fast?
There are a number of reasons why the PV industry in China has experienced tremendous growth within a short span of time. For...