By KEITH BRADSHER and MATTHEW L. WALD
The United States Commerce Department said Tuesday it would impose tariffs on solar panels imported from China after concluding that the Chinese government provided illegal export subsidies to manufacturers there.
The tariffs were smaller than some American industry executives had hoped for — 2.9 percent to 4.73 percent — which could blunt their effect on the market. But additional tariffs could be imposed in May, when the Commerce Department is scheduled to decide whether China is “dumping†solar panels into the United States at prices below their actual cost. A finding of dumping would result in additional tariffs that could be far larger than the anti-subsidy tariffs.
But whatever the size of the penalties, Tuesday’s ruling is likely to further heighten trade tensions with China, while holding implications for renewable energy policy in this country.
Although the ruling is the result of a quasi-judicial review process by civil servants in the Commerce Department, the imposition of tariffs by an arm of the Obama administration seems certain to enter the partisan fray.
The president’s backers might point to it as evidence that he continues to play tough with Beijing. But opponents, including the Republican presidential candidate Mitt Romney, who are already criticizing Mr. Obama for what they say is the low level of attention to China trade issues, might call the small penalties insufficient.
Whatever political spin proponents or critics might want to put on the tariff decision, there is no question that solar panels from China now control about half the American market, while panel makers based in the United States hold less than one-third. American imports of Chinese solar panels have soared to $2.65 billion last year from $21.3 million in 2005.
But while American manufacturers oppose the imports and filed the trade case against China, users of solar energy have benefited from low-cost Chinese solar panels. In fact, an American industry group composed of companies that sell and install solar panels said Tuesday they were pleased with the relatively small size of the tariffs, having braced for higher ones.
“This is a huge victory for the U.S. solar industry and our 100,000 employees,†said Jigar Shah, president of the Coalition for Affordable Solar Energy. “Given all our expectations, this is really good news.â€
Globally, low-cost Chinese panels have driven down the cost of solar energy by two-thirds in the last four years, narrowing but not eliminating the wide price gap that used to separate solar power from electricity generated by burning fossil fuels.
But the solar energy boom has held few benefits for the American industry. The plunging prices led to the bankruptcy of three American solar panel manufacturers last August.
One of the failures was Solyndra, which cost the federal government more than $500 million. Solyndra’s collapse has been the subject of an ongoing investigation by Congressional Republicans, who contend that the Obama administration should not have lent so much money for an unproved clean energy program.
The Commerce Department decision Tuesday may be the most comprehensive review yet by an American government agency of how China uses subsidies.
China now has about 700 solar panel manufacturers with a combined annual production capacity of 40 gigawatts of electricity — the electric power equivalent, at peak sunlight hours, to the total output of every electrical generating station in New York State.
Chinese companies have been able to grow so fast, and cut costs so quickly, because they could take out large loans from government-owned banks. Although Chinese bankers and solar panel executives now deny those loans were made at subsidized rates, that was a central issue in the Commerce Department’s anti-subsidy review.
The question facing the Commerce Department was whether the Chinese government’s support violated American laws — and international free trade rules — that are supposed to prevent countries from spending government money to help exporters buy market share in foreign countries.
A few Chinese companies have acknowledged receiving substantial government assistance. Executives at Hunan Sunzone Optoelectronics, a solar panel manufacturer in Changsha, said in interviews in 2010 that they had been able to buy valuable land near downtown for a third of the citywide rate for industrial land. And the company said that Chinese bankers had come to it offering large loans at just 6 percent interest — below market rates at the time — with the provincial government paying much of the interest.
China’s huge and growing need for oil imported from volatile countries in the Mideast and Africa has made energy independence one of the country’s highest strategic as well as economic objectives. Top Chinese officials have talked extensively in recent years about the need to support renewable energy industries. They also have encouraged local and provincial governments to remove regulatory obstacles and have pushed state-owned banks to lend heavily to the sector.
And yet, until very recently China has not focused on installed solar panels domestically. The factories were primarily geared for export.
Government subsidies are by no means solely a Chinese practice. The United States supported the development of solar energy by offering financial incentives for companies and households to buy solar panels. And many states have put quotas on power companies for the amount of renewable energy they must buy.
But China focused first on developing large-scale manufacturing of solar panels for export, and has started only in the past year to subsidize the installation of large numbers of solar panels within China.
The result is that up to 95 percent of China’s output in recent years has been exported, leading critics to suggest that China was capitalizing on other countries’ solar subsidies. Chinese officials have rejected those suggestions, and have hinted that they might retaliate with a trade case against American exports of polysilicon, a material used in manufacturing solar panels.
Ben Santarris, a spokesman for SolarWorld, the leader of the manufacturing coalition that filed the anti-subsidy case at the Commerce Department, said that the company still hoped that higher tariffs would come later this year. The Commerce Department will continue investigating evidence of Chinese subsidies, and later this year will reassess Tuesday’s preliminary ruling.
Some trade experts are already suggesting that the United States and China should look at trade strategies that were worked out between the United States and Japan during the 1980s to manage Japan’s rapid rise as an exporter. These strategies included so-called voluntary export restraints by Japan, which were actually far from voluntary. They included restraints that President Reagan imposed on Japanese cars in 1981, as well as government-led research programs like Sematech, which President Reagan helped establish in 1987 to assist the American semiconductor industry.
“The future of renewable alternative energy, and in this case solar energy, is too important to be left to be ‘solved’ by litigation,†said Alan Wolff, a former Nixon, Ford and Carter administration trade official who was one of the leading trade lawyers during the struggles with Japan in the 1980s. “Beijing and Washington have the means to work out a mutually and globally beneficial way to work out a solution to the solar panel trade case.â€
The solar panel industry also faces a serious challenge from the plunging price of natural gas in the United States, where new drilling techniques have brought large increases in the amount of gas on the market. The deployment of those same drilling techniques in foreign markets, notably China, could bring down the price of gas there as well, making solar panels seem costly by comparison, even though their price has already fallen by about two-thirds since 2008 on surging Chinese production.
The Commerce Department decision is subject to a ruling by the International Trade Commission that the domestic industry has suffered harm from imports. Such decisions usually favor the domestic industry when there have been bankruptcies or mass layoffs. Besides the three bankruptcies in the American solar industry, all last August, at least four of the biggest survivors have also resorted to sizable layoffs in the past two years.
One of the companies, Evergreen Solar, had announced in January last year that it was moving production from Massachusetts to China because the Chinese government was offering more financial support for manufacturers there. But the move came too late to save the company from declaring bankruptcy.
Keith Bradsher reported from Hong Kong and Matthew L. Wald from Washington.
Source: New York Times