Taiwanese cell manufactures set to benefit from US-China trade dispute

11. November 2011 | Top News, Global PV markets, Industry & Suppliers, Markets & Trends, Trade cases | By:  Becky Stuart/Eckhart Gouras

Taiwanese solar cell manufacturers are likely to benefit from the U.S.-China trade debate, if countervailing duties are imposed as early as March 2012. Meanwhile, following the first hearing by the International Trade Commission (ITC), the dispute was expanded to include solar cells. Word on the street is that SolarWorld is just on a marketing jaunt and could face a U.S. backlash.

Suntech solar photovoltaoc module manufacturing

Solar manufacturers like Suntech, are under scruitiny. Image: Suntech.

The first hearing by the ITC which, along with the U.S. Department of Commerce (DOC), is investigating the alleged dumping and unfair subsidies by Chinese manufacturers of solar panels in the U.S., saw the expansion of the petitioners' claim to include solar cells. This greatly increases the scope of the year-long investigation, which now poses a threat to Chinese manufacturers who assemble modules in the U.S., but import cells from their Chinese factories or suppliers. SolarWorld and the unnamed Coalition for American Solar Manufacturing (CASM) members have applauded the decision.

The case at hand, while adding cells to the scope of the investigation, focuses only on crystalline silicon cells and modules. If the products utilize other technologies, like thin film, they are excluded for purposes of this investigation. But that certainly paints a peculiar picture of the U.S. cell and panel market. For example, America's premier solar manufacturer First Solar is conveniently removed from the relevant market.

Beneficiaries

According to analysts at Jefferies, Taiwan could well become the main beneficiary, as they believe buying Taiwanese solar cells and assembling them outside of China could be the most cost-effective alternative for U.S. solar projects.

They add that First Solar could also receive a boost, due to the fact it faces less pronounced pricing pressure from China. Other companies, like SunPower and Suniva could additionally benefit, but to a lesser extent. Furthermore, say the analysts, "Solarworld may see backlash as U.S. developers and installers are hurt by this scorched Earth approach."

Backlash

The U.S. solar industry, which has seen a plethora of insolvencies announced and production cutbacks implemented, and is already suffering from a lack of financing, will see higher photovoltaic module prices and lower demand if the measures are imposed.

Already, the petition has caused controversy in the industry, with one anonymous source stating that it would be good to see SolarWorld putting as much effort into fighting the oil lobbyists as does in raising issues in its own industry, which is already facing momentous challenges this year. Looking back, SolarWorld was also part of the lobby against using cadmium in photovoltaics.

Another industry player said that the petition is all about PR, with SolarWorld’s main goal being to raise support with both the public and policy makers for "special funding". At the time it was submitted, a number of companies spoke out against the move, including Suntech, Yingli, JinkoSolar, CNPV and Canadian Solar.

What is also interesting is the fact that the seven companies which initially formed the CASM, remain unidentified. While there may be reasons for the anonymity, when they are calling for transparency, there are comments that they could practice what they preach. Since its inception on October 19, CASM has grown to include more than 125 associate members and attracted support from the United Steelworkers. It has yet to respond to pv magazine’s requests for an interview.

At the start of the week, a counter coalition was set up to CASM. Named CASE: The Coalition For Affordable Solar Energy, it is said to comprise "dozens of companies representing all sectors of the American solar industry". On its website, it says, "SolarWorld's action to block or dramatically curtail solar cell imports from China places that goal at risk. Protectionism harms the future of solar energy in America and negatively impacts consumers, ratepayers, and over 100,000 American solar jobs."

No argument

Interestingly, the Chinese respondents in this case do not have an argument in their favor if they can show that the imposition of a certain tariff were to make their product much pricier, comparable goods in the U.S. market. According to veteran trade lawyer, Edward Lebow, interviewed by Jeffries in a conference call on Wednesday, this is irrelevant to the analysis of this case by the ITC and DOC.

Another strike against the respondents is the fact that China is considered, at least by the U.S., a "non-market economy", which means that there is a lot of room for determining the costs of the factors of production that go into making a cell or module. So-called "surrogate" countries are used to get at the true costs of production. These countries might lack the production scale of Chinese photovoltaic manufacturers, contributing to higher production costs. But this is also ignored in the assessment of costs, which ultimately determine whether the cells or modules were sold below cost and so "dumped" in the U.S. markets.

"The ITC determines if dumped items injure the U.S. industry (and defines which companies are the industry), explained the Jefferies analysts. They continued, "Anti-dumping law is somewhat unfair since it compares countries that are not at scale with higher cost. For instance, the SolarWorld Petition uses India as a comparison. The respondents will argue that the cost of production in India is too high, and is not at scale, and may instead seek to compare to other countries in Southeast Asia."

Lebow points to another oddity of this case, namely that large Chinese players can avoid the brunt of any tariffs by showing different numbers for their production inputs and pricing. The Jefferies analysts further explain, "Mandatory respondents will be given their own individual dumping and countervailing duty rates, depending on whether dumping and/or subsidies exist. Smaller module companies will take the weighted average of those investigated. If an individual company is found to not be dumping or subsidized, it will not incur a tariff, and will have an enormous competitive advantage."


The analysts add that instead of using dumping another "trade remedy" could be applied, namely safeguards. "Under certain conditions," they explain, "when imports have raised dramatically and impaired the local market, there can be temporary safeguard duties for a limited period to allow the domestic industry a plan for turnaround. Safeguards can apply to many countries, not just those named in the case. Senator Ron Wyden has expressed some interest in a safeguards investigation. China has accepted that safeguards may be imposed on its exports to WTO countries."

Most likely, this case will attract attention for at least another year, since the ITC makes its final determination on whether U.S. manufacturers were in fact injured in November 2012. And then respondents can still appeal the decision in federal courts or seek a review by the World Trade Organization (WTO), the final arbiter of international trade disputes involving WTO member countries.


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SolarWorld Americas SolarWorld Americas

Monday, 14.11.2011 22:00

First, anyone with the barest grasp of the intimidating chore of mounting federal trade petitions knows that no one would ever shoulder the work or expense without a fierce resolve to right a wrong -- in this case, a wrong that has cost many Americans their jobs. Clearly, the Commerce Department, which has the burden of adjudicating such cases, is persuaded SolarWorld's concerns merit substantive investigation or it would not have launched its investigation this week. Second, SolarWorld's case was never expanded to include solar cells; any passing glance at the factual record would verify that the case always expressly covered cells. Third, SolarWorld, too, fully expects a backlash from elements of the U.S. solar business: namely, from those companies that founded their business plans on illegal Chinese imports. However, the company knows it has the backing of most of the actual domestic manufacturing industry. Finally, if there was an attempt to seek comment from SolarWorld, the company apologizes for any failure in responding. Please email ben.santarris@solarworldusa.com.

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