Published on January 20th, 2012 | by Andrew1
US-China SolarTrade Dispute: The Case for CASM and US Manufacturing
Rapid growth in the global market for solar photovoltaic (PV) systems and technology assures that competition in the industry will remain fierce all along the value chain, and that brewing international trade tension and disputes regarding their manufacture and export will remain high on the political agenda, as well as prominent in the industry and public eye.
On October 19, 2011, the Coalition for American Solar Manufacturing (CASM), an association of seven US manufacturers of silicon solar PV cells and panels lead by SolarWorld Industries America, Inc. represented by the Washington, D.C. law firm of Wiley, Rein LLP, filed anti-dumping and countervailing duty petitions with the US International Trade Commission (ITC) and Dept. of Commerce.
The petitions allege that: 1) Chinese manufacturers are illegally dumping product in the US below their domestic cost of production or prevailing domestic market prices, and 2) that the Chinese government is engaging in unfair international trade practices by illegally subsidizing manufacturing and export of silicon solar PV cells and panels. Both cases need to be proven within the context of internationally agreed-upon rules spelled out in World Trade Organization (WTO) agreements, which includes presenting evidence that US manufacturers of silicon solar PV cells and panels are being harmed as a result.
Keen to delve into this issue further, Clean Technica accepted an invitation to interview Tim Brightbill, a partner at the Washington, D.C. law firm of Wiley, Rein LLP. As the lead lawyer in CASM’s trade dispute, Brightbill explained that he and his legal team have to prove two things: a) that Chinese silicon solar PV manufacturers are illegally dumping product in the US in a predatory way that’s been harming US manufacturers; and b) that the Chinese government is engaging in unfair trade practices by illegally subsidizing manufacturers and exports that have been damaging businesses in the countries of fellow WTO members; in this case, the US.
The Nature and Process of Adjudicating WTO International Trade Disputes
On December 2, the investigating panel of six ITC commissioners voted unanimously in favor of both petitions, paving the way for the required, comprehensive and detailed investigations by both the ITC and Commerce Dept. that are now under way. Around mid-February, the ITC is expected to publish its determination of the magnitude of Chinese subsidies and a countervailing duty (CVD) margin that would be used to assess penalties on Chinese imports.
In their petitions, CASM and Wiley, Rein LLP determined that the CVD, or ‘dumping,’ margin for US imports of Chinese silicon solar PV modules exceeded 100%–that is to say, for instance, that they were being sold at $1 per Watt (W) in the US when their fully loaded costs were more than $2 per Watt in China, or as per WTO rules for assessing such petitions, an equivalent “market-based economy.” More on this last point later.
Addressing the other key elements required to prove their case, CASM and Wiley, Rein LLP also present documented evidence that China is illegally subsidizing the manufacture and export of silicon solar PV cells and panels on a massive scale, and that both the dumping of product in the US and the government subsidies have been damaging silicon solar PV manufacturers in another WTO member country, the US. Additional details on this will be provided shortly as well.
Unleashing a Trade Maelstrom
CASM’s filing of complaints with the ITC and US Dept. of Commerce has generated a maelstrom of public debate and public relations activity that’s rippled out far wider than the confines of the US’ emerging solar power industry, and justifiably so.
The brewing trade dispute brings to the surface broad, fundamental economic, social and political issues and tensions that have been building up for well over a decade. Among these is Americans’ view of themselves and the American economy. I’ll raise and explore at least some of them in a second part to this post. To begin here in Part I, I’ll very quickly summarize the essential substance of the criticism being leveled at CASM for filing the trade complaints.
China’s subsidization of its solar PV manfucturers and exports has caused the prices of solar panels to plunge during the past year or so. That’s driven the overall cost of installing solar PV systems down to levels that they most likely would not have reached otherwise. China’s subsidy program, along with US federal, state and local government incentives, has spurred rapid growth in demand.
So, why not sit back and take advantage of China’s willingness to massively subsidize the manufacture and export of silicon solar PV cells and modules? After all, everyone wins, at least in one sense or another, don’t they?
Yes, in one sense or another. Yet, there’s much more to the overall picture that needs to be considered, especially when the longer term economic and social effects of essentially ceding the manufacture of goods that are key elements in emerging industries likely to be primary drivers of economic and employment growth for decades to come.
To be continued…