On Monday the World Trade Organization (WTO) found the United States guilty of violating global trade rules when it imposed punitive import duties in 2012 on a number of Chinese products, including solar panels. In the $7.2 billion case, the 3-member WTO panel found that the U.S. was unjustifiably imposing countervailing duties as a response to the alleged subsidies that the Chinese government was providing to exporting firms.
U.S. Trade Representative Michael Froman called the outcome a “mixed result” since the panel also rejected some of the Chinese arguments against the U.S. countervailing duties, saying that the U.S. “will take all appropriate steps to ensure that U.S. remedies against unfair subsidies remain strong and effective.”
The bulk of the domestic solar community is in favor of the decision and against protectionist tariffs, however SolarWorld, the largest manufacturer of solar panels in the U.S., is leading the charge for more punitive duties. The decision is also only one in a string of important trade disputes impacting the industry. The U.S. Department of Commerce recently imposed new tariffs on solar modules from China ranging from 18.56 to 35.21 percent. Research from Greentech Media found that these tariffs could lead to an average overall price increase of 14 percent on modules shipped into the U.S. by Chinese suppliers. The WTO decision may also take a long time to have any direct impact, if it has a noticeable one at all.
The Coalition for American Solar Manufacturing (CASM) has supported SolarWorld’s effort to impose anti-subsidy and anti-dumping duties on Chinese manufacturers since 2011. Once those duties were imposed in 2012 many Chinese solar producers were able to circumvent them through a loophole enabling them to avoid tariffs by outsourcing cell production to Taiwan. The Department of Commerce is looking to close this loophole by imposing import duties on solar cells, panels, and related products manufactured and exported by Chinese companies.
Mukesh Dulani, president of SolarWorld Industries America, applauded the recent decision by the Department of Commerce, saying in a statement in June that it was a “strong win for the U.S. solar industry,” and that SolarWorld looks “forward to the end of illegal Chinese government intervention in the U.S. solar market.”
As far as this week’s ruling from the WTO, SolarWorld said it was basically meaningless and would only decrease anti-subsidy tariffs by about one percent. SolarWorld responded to ThinkProgress’s questions about the impact of the WTO decision by providing a recent study from Northwestern University and the U.S. DOE showing that European PV panels emit fewer greenhouse gases during the manufacturing process than equivalent products produced in China. The study, to be published in the July issue of the journal Solar Energy, found that E.U. PV panels emit 48 percent fewer life-cycle GHGs, mostly due to China’s reliance on coal-fired power plants during the energy-intensive manufacturing process.
SolarWorld then commissioned sustainability research and consulting firm Good Company to extend the study to include U.S. PV manufacturing in the state of Oregon where SolarWorld’s American factories are located. That study found that Oregon’s production of mono-crystalline silicon PV panels emits 23 percent less GHG emissions than similar Chinese production.
Source for EU and China: EIA, International Outlook 2014, Appendix H Source for US: Annual Energy Outlook 2014 (early release overview), Table 93 and Table 118
The Domestic Dispute
Jigar Shah, president of the Coalition for Affordable Solar Energy (CASE) and founder of SunEdison, a solar energy services provider, told ThinkProgress that the WTO decision isn’t going to solve the issue and that what really needs to happen is a negotiated solution by the White House to end global solar subsidies and tariffs. This will entail bringing SolarWorld to the table.
This isn’t what we should be doing if we’re going to find a climate solution.
“When you think about the U.S. suing India through the WTO, Japan is suing Canada, and the China-U.S. stuff — this isn’t what we should be doing if we’re going to find a climate solution,” said Shah.
The Solar Energy Industries Association (SEIA) is developing a voluntary multilateral consensus document to clarify WTO-acceptable government support programs, saying on their website that “given the rapid growth of the solar industry and relative infancy of government support programs, SEIA feels there is an urgent need to agree upon acceptable forms of government support,” and that “the sector is too important for the world’s energy security to jeopardize with more trade wars.”
Shah that even as the Obama administration says the right things about solar and has decent solar programs, they are not leading on this issue in particular, in part because it is hard to draw in public attention to such an “in the weeds” issue.
When it comes to the Department of Commerce’s decision to impose new tariffs, Brian D. Manning on the Clean and Green Law blog wrote that it represents a slippery slope, whereby the good intentions of the Department of Commerce to protect the U.S. market will actually result in an overall negative impact to it long term:
There is certainly a strong argument to be made that the flooding of the U.S. market with cheaper and inexpensive solar panels has negatively affected its development, but the “invisible hand” dictates that this be addressed through open competition, and if necessary, federal and state grants to offset the Chinese policy.
Shah recently praised another move by the WTO: the announcement that 14 members countries, including the U.S. and China, have entered negotiations aimed at eliminating tariffs or customs duties on a wide range of environmental goods, including solar products. While the U.S. and China are otherwise gridlocked in bilateral tariff negotiations, the WTO is working on an agreement that would cover 86 percent of trade in goods such as solar panels, wind turbines, and other environmental goods. The negotiations also include Australia, Canada, Costa Rica, Hong Kong, Japan, Korea, New Zealand, Norway, Singapore, Switzerland, and Taiwan.
“The WTO environmental goods announcement is relevant to the extent that it gets people talking,” said Shah. “It won’t make a difference this year, but it’s a good long-term goal to put in place a treaty to call off the dogs on these tariffs on climate deals. But really we’ve been working on this since 2012 and the only way to get it done is through a negotiated settlement between the White House and SolarWorld.”
SEIA declined to comment further on the WTO decision, as did First Solar, a large U.S. solar manufacturer.
This post has been updated to reflect the comments of Jigar Shah. Comments previously in the post were wrongly attributed to Shyam Mehta from GTM Research.