As trade war escalates, China announces probe of U.S. polysilicon exports

In the latest escalation of a trade dispute that is roiling the renewable energy industry, China's Ministry of Commerce announced today that it is launching an investigation of solar-grade polysilicon exports from the United States.

According to a ministry news release, four of China's largest polysilicon manufacturers have charged that the U.S. government is improperly subsidizing domestic polysilicon producers and that U.S. companies are illegally dumping their product on the Chinese market at a price below their value. In the same announcement, China said it would also investigate dumping accusations regarding South Korean polysilicon producers.

The petitioners in the case include Jiangsu Zhongneng Polysilicon, LDK Solar, China Silicon Corp. Ltd. and Daqo New Energy Co. The investigation is expected to take a year but could last as long as 18 months.

Today's announcement was described as a retaliatory step by trade officials in the U.S. renewables sector as it comes amid an ongoing U.S. Department of Commerce probe of Chinese-made solar modules -- and just one week before a key decision is expected on a separate investigation involving Chinese-made steel towers used in utility-scale wind turbines.

"We're disappointed by China's decision to escalate the U.S.-China solar trade conflict," John Smirnow, vice president of trade and competitiveness for the D.C.-based Solar Energy Industries Association (SEIA), said today.


SEIA has called on both the United States and China to step back from the edge in their ongoing solar dispute.

"We think that what's missing from today's decision is any effort to find common ground," Smirnow said. "There is an urgent need for the U.S. and China to work together to develop solutions and forward thinking action on these issues."

Smirnow suggested that the best place to start that effort might be at a September meeting of the Asia-Pacific Economic Cooperation (APEC), where the United States and Chinese and other Pacific leaders have the opportunity to start a dialogue about several ongoing trade issues.

U.S. has aggressively gone after China

Last fall, SolarWorld Industries America -- the largest solar manufacturer in the United States -- joined a half-dozen smaller companies to launch a countervailing duty and dumping complaint against China and its domestic manufacturers of crystalline silicon photovoltaic modules.

Within days after Commerce ruled in favor of the companies on the illegal subsidy charge in March -- which opened the door for the United States to collect a tariff of 2.9 percent to 4.7 percent on Chinese imports -- China's Ministry of Commerce responded by charging that U.S. renewable energy development programs in five states violated global trade rules.

In May, U.S. Commerce officials took a much more significant step when they ruled in favor of SolarWorld and its fellow petitioners on their dumping accusations and hit Chinese solar manufacturers with tariffs ranging from about 30 percent to 250 percent.

In the wind tower case, Commerce has already ruled in favor of American manufacturers on their countervailing duty complaint, and officials are expected to issue a ruling on the dumping charges as early as July 27. Vietnamese manufactures have also been targeted in that investigation (E&ENews PM, May 30).

Both cases still have months to go before the rulings are finalized, but on Capitol Hill the solar trade case has garnered more attention.

This week, Rep. Dennis Kucinich (D-Ohio) used a House Oversight and Government Committee reform hearing on the recently failed U.S. solar manufacturer Abound Solar to call on House Republicans to focus on the trade issue rather than attacking the Obama administration's efforts to promote the United States' renewable energy sector.

"The real scandal that we need to address is the systematic, illegal dumping of subsidized Chinese solar panels in the United States," Kucinich said at Wednesday's hearing. "Instead of investigating potential solutions to the problem, we are attacking the companies that have been undermined by this. This doesn't make any sense. If we direct our attention at attacking each other and wipe out opportunities for American businesses in this sector, then China seizes the market."

Yesterday, the Senate Finance Committee passed a bipartisan measure sponsored by Oregon Sen. Ron Wyden (D) aimed at clamping down on efforts by foreign suppliers to avoid trade tariffs by rerouting their products before they reach the United States. SolarWorld and its coalition has accused Chinese manufactures of doing just that in the wake of Commerce's recent tariff determinations (Greenwire, July 19).

Wyden has been a vocal supporter of the SolarWorld trade case and highly critical of Chinese efforts to evade duties meant to level the playing field.

This morning, SolarWorld President Gordon Brinser said China's announcement is proof that the country is intent on dominating the global solar market. Brinser said China's actions prove that the Asian country is not just intent on decimating the U.S. solar manufacturing but also wants to hurt U.S. polysilicon producers by shutting them out of the Chinese market.

"While it was not unexpected, the announcement of retaliatory investigations into U.S. polysilicon production is harmful to the international trade system," Brinser said. "It represents yet another cynical attempt by the Chinese government to bully the U.S. government by injecting politics into a judicial investigation that is sanctioned under international trade rules."

But SolarWorld's efforts aren't universally supported in the solar industry. A coalition of U.S. and Chinese manufacturers and U.S. installers has sought to rally opposition to SolarWorld's efforts, which have also included plans by its parent company to launch a similar trade action against China in the European Union this summer (Greenwire, June 26).

That group, which calls itself the Coalition for Affordable Solar Energy (CASE), argues that a solar trade war with China would boost solar prices around the world, kill future projects and cost jobs for the industry.

"Tariffs at any point in the global solar value chain are counterproductive and make solar energy less competitive against fossil fuels," CASE President Jigar Shah said in a news release today following China's announcement. "We urge all countries to avoid unilateral actions that impede trade and resolve conflicts in a bilateral or multilateral context."

Shah's group has warned since last fall that SolarWorld's case would only lead to retaliatory trade efforts.

"We urge the U.S. and China to rise above SolarWorld's selfish action and engage in productive dialogue to prevent this destructive trade war," Shah said. "Lowering, not artificially raising, the cost of solar should be a global goal."

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