U.S.-China Solar Trade War Escalates: China Retaliates With its Own Investigation
The U.S. Department of Commerce launched an anti-dumping investigation on Chinese solar manufacturers last month. In anticipation, Chinese companies are moving production sites and have launched their own investigation on U.S.-manufactured polysilicon.
The China Ministry of Commerce launched its own investigation into whether U.S. subsidies and other policies in the solar, wind and hydroelectric sectors had unfairly hurt the industrial development of China's renewable energy industries. The decision is scheduled for May 25, 2012, which allows China time to retaliate if the U.S. Department of Commerce imposes punitive tariffs on Chinese solar cells as part of its anti-dumping investigation, for which the decision is due in March, or its antisubsidy investigation, for which the decision is due early May.
Chinese companies are additionally considering outsourcing solar cell assembly from China in anticipation of punitive tariffs against cells manufactured in China. There are four steps in solar panel manufacturing. The first is creating silicon crystals, called ingots, from molten silicon; the second is cutting the ingots into thin slices called wafers; the third consists of chemically treating the wafers and adding electrical contacts, turning them into solar cells; the last step involves connecting several solar cells together to create a solar module. The U.S. sanctions would be against solar panels for which either of the two final steps is performed in China. By moving solar cell production to other countries, China would be circumventing the sanctions. Companies already have plants in North America, for instance, and could also buy Taiwanese solar cells and assemble them into modules outside China, according to an article in Bloomberg.
We have already discussed the potential downsides of a solar trade war, including an increase in the price of solar panels and fewer investment projects in solar in the U.S. Should China feel that the U.S. has imposed unfair sanctions, the country would consider taking the matter to the World Trade Organization (WTO). The WTO sets stringent rules on the types of subsidies that the U.S. is accusing China of having introduced, but the organization also bans countries from imposing policies that discriminate against imports from a specific country.