In terms of trade law, the United States and China are bitter rivals, even enemies. As the United States makes its efforts, through the assessment of what is called countervailing duties, to protect domestic manufacturers from being undercut by cheaper Chinese products, the Chinese government is doing all that it can to promote, through subsidies, the former and to assess retaliatory tariffs on U.S. exports to China. Among the seemingly boundless amount of industries that this rivalrous phenomenon affects, there is an affected industry that the U.S.-China trade war can either make or break: that industry is the production of polysilicon–the refined material that is used to create solar energy.

Solar energy is in many ways the future, and polysilicon is the key to that future. Polysilicon is a hyper-pure form of silicon that is the main material used in solar panels, and the polysilicon production industry is a potential hotbed for new jobs and the expansion of skilled manufacturing in the United States. However, as the United States and other industrialized countries are making the political and economic pushes toward the use of sustainable and renewable energy technologies into the mainstream market, U.S. and international trade law are taking their toll on the process.

Under U.S. and international trade laws, foreign exporters are not authorized to utilize subsidies given by their local governments which allow the exporters to introduce their products to the U.S. market at a cheaper cost than would be possible without the government subsidies. When a foreign government grants a subsidy to its own domestic producers the U.S.  assesses a penalty known as a countervailing duty, which is mean to correct for the subsidy that was given by the foreign government to it domestic exporter. At the heart of it all is the notion that all market participants–traders–should be given an equal opportunity to sell their goods in both foreign and domestic markets.

But, as always, both nations and corporations are in search of a competitive advantage. In the case of polysilicon and solar panel production, the stakes are as high as can be. In one featured locale, Grant County, Washington State, USA, the importance of polysilicon production and the solar panel industry can hardly be overlooked. In Grant Country, polysilicon production is a billion dollar industry, and it goes without saying that the median salary of $78,000 for production employees in Grant County is a figure worth fighting for. Unfortunately, the 57% duty rate that has been assessed by the Chinese Ministry of Commerce as retaliation against the U.S. for the 57% duty rate that it imposed on Chinese solar panel imports last year is not helping.

The legal problem is this: While the U.S. has the right to assess countervailing duties against a foreign producer that is receiving subsidies from their local government, the Chinese do not have the right to assess a punitive tariff to U.S. produced products, as such an assessment would be in violation of the GATT under the WTO. Therefore, even though the U.S. may be in the right, there is serious trouble on the horizon, as the U.S.’ assessment of countervailing duties has inferentially caused its own companies greater financial hardship than was present while the Chinese were merely granting subsidies to its domestic solar panel producers who wished to sell in American markets. Now that the problem is compounded–American solar panel producers are disadvantaged by Chinese subsidies and the American polysilicon producers are disadvantaged by a 57% tariff rate–there should be a re-assessment by the Office of the U.S. Trade Representative and the U.S. Department of Commerce International Trade Administration as to how they should best protect their own industries, such as the polysilicon production industry in Grant County, WA.

Based on this information, what is your opinion on the countervailing duties that the U.S. assesses the Chinese solar panel producers? Do you think that the 57% rate is a necessary measure? What about the seemingly retaliatory 57% tariff imposed by the Chinese and the question of whether, under the WTO and GATT, they can even assess such a tariff? Other thoughts?

 

Article Source: Seattle Times, Solar Struggle, Monday, August 19, 2013 (print source)

Photo Source: Cleanbiz.asia