Expanding upon the trade policies enacted against other countries, the US administration recently announced the end of preferential trade treatment for India on account of its ‘developing country’ status. As part of this development, Indian solar module exports shall now attract a 25% safeguard duty.
Acting on its announced intentions, the Trump administration imposed safeguard duties on India products imported into the United States. While the cumulative impact would be much higher on other commodities that India exports to the United States, solar modules, too, shall be impacted, albeit to a very small extent given their meager share in total Indian exports to the United States.
This in not the first time that the United States has imposed safeguard duties on solar imports. Mercom India notes that in January 2018 30% safeguard duties were imposed by the Trump administration on all crystalline silicon photovoltaic cells imported in the country. However, countries like India, Brazil, and South Africa were exempt from this duty.
The safeguard duty was effective February 7, 2018 at a rate of 30% with 500 basis points reduction every year till 2022 reaching 15%. Indian exports shall thus attract a 25% duty on an immediate basis following withdrawal of this exemption.
In terms of solar trade there is a clear trade imbalance. According to India’s Ministry of Commerce, India exported solar modules worth $53 million to the United States in 2018-19, up 33% year-on-year. This represents around 44% of the total solar module exports from India. On the other hand, India imported solar modules worth $8.2 million from the United States in 2018-19, up from just $1.77 million in 2017-18. The United States had a share of just 0.03% in India’s total solar module imports, which remained dominated by China with a share of over 78% in 2018-19.
The overall trade between India and the United States, too, is imbalanced. India exported goods worth $52.4 billion to the United States and imported goods worth $35.5 billion. Of the goods exported by India, solar modules accounted for 0.01% for the total value.
While the share of solar module exports is virtually negligible on the overall scheme of things, it may be a lifeline to the Indian solar module manufacturers that have struggled for years to resist the ever-growing Chinese dominance at home.
India was forced to cancel solar power programs directed towards use of Indian-made modules and equipment after it suffered a setback at the hands of the United States at the World Trade Organization in September 2016. That program of Domestic Content Requirement was the only major hope that Indian manufacturers had against dominance of Chinese solar module companies.