The United States dealt a blow to U.S. solar panel manufacturers and boosted shares in Chinese rivals when it imposed unexpectedly low duties on imports from China, though the move still drew fire from China industry representatives.DOC's fact sheet for the preliminary determination is here, and the determination itself is here. As you can see, the two investigated Chinese companies received CVD rates of 2.90% and 4.73% and "all other" Chinese importers received 3.61% (essentially the average of the two investigated rates). The US industry tried to put some lipstick on these piggish results by "welcoming" the fact that DOC had "noticed" China's "unfair trading practices," but let's get serious here: 3.6% is an extremely low subsidy margin for a case involving China. Indeed, if you look through all of the completed anti-subsidy investigations of Chinese goods over the last few years, you'll have a tough time finding preliminary CVD rates - particularly "all others" rates - that are lower than the ones found here. (Most are above 20% and can go above 100% in some cases - ouch.) Even though these investigations involve many different products, petitioners (and their lawyers) typically allege the same subsidy programs in each investigation involving a certain country. Thus, previous investigations of Chinese imports typically give you a rough idea of the level of subsidization that you're going to find in future investigations of Chinese imports, even though the imports differ.
The action, made public late on Tuesday, adds to trade tension between the world's two largest economies and threatens cooperation in the burgeoning clean-energy sector, which both say they want to promote.
Energy analysts had expected Chinese imports of solar panels to be hit with preliminary duties of 20 percent to 30 percent, but the rates announced on Tuesday ranged from just 2.90 percent to 4.73 percent - although these could be raised in future.
Given the pretty long history of US CVD investigations of Chinese imports (and the pretty high preliminary CVD margins found in those cases), there can be little doubt that the petitioning US solar industry was none-too-pleased with last Tuesday's surprising determination. (FYI: I gave Reuters a few guesses as to why the rates were so low.) Meanwhile, US solar panels consumers were thrilled (as were Chinese solar investors), and, although the Chinese government grumbled a bit, it didn't retaliate against US exports as it repeatedly has done in the past. And because CVD rates tend to decline between the preliminary and final determinations, there's a chance that the final US countervailing duties on Chinese solar panels could be even lower. (If the rates went below 1.0%, they'd be de minimis and thus no duties would be applied at all. That seems unlikely, but it's still worth noting.)
That said, US solar consumers shouldn't get too excited here. First, DOC's preliminary determination makes clear that the agency has begun investigating a few newly-alleged subsidy programs that weren't included in the preliminary findings. If DOC finds that the Chinese government provided its domestic solar industry with huge subsidies via these programs, the final CVD rates could go up, not down. Second, and far more importantly, DOC has not yet announced preliminary anti-dumping duties for the same Chinese imports. That determination is due in mid-May, and the rates there are expected to be very, very high because (a) DOC is still using the dubious "non-market economy" methodology for calculating anti-dumping duties on Chinese goods, and it tends to produce much higher dumping margins (hence why petitioners and their political friends have strenuously resisted any attempts to deem China a "market economy," regardless of how rational and equitable such a move would be); and (b) according to the industry experts I've spoken to, the global solar panels market (and prices) absolutely collapsed in 2009-2010, leaving pretty much everyone on the planet with excess inventory that they desperately tried to shed, usually at rock-bottom prices.
Assuming that the preliminary and final anti-dumping rates are as high as they're expected to be, then the low prelim/final CVD rates won't matter (even if DOC somehow accounts for "double counting" based on the new CVD/NME law - something it didn't mention in the CVD prelim). This is why the US solar industry and their congressional benefactors expressed confidence that they'd get the sweet, sweet protection from Chinese imports that they desperately crave. That said, the high combined duties will still be instructive, as they'll clearly demonstrate (a) why certain protectionist US industries and politicians fight so hard for the NME methodology; and (b) that the US anti-dumping law penalizes foreign companies' routine, market-based pricing decisions rather than the "predatory pricing" that it's supposed to counteract. (According to the aforementioned industry experts, everyone in the world "dumped" solar panels when the market/prices collapsed because they were forced to shed high-cost inventory in order to stay afloat. Nothing "predatory" about that.)
Now, even though the final duties on Chinese solar panels could be - and probably will be - high enough to keep most of those imports out of the US market (sorry, solar panel consumers!), DOC's preliminary CVD announcement remains important from a political and policy perspective. As you may recall, much of the US solar industry and its political champions in the Obama administration and Congress have loudly blamed (over and over and over) massive, "illegal" Chinese subsidies for the dismal performance of both the industry and the numerous US subsidy programs supporting it (totaling billions of taxpayer dollars). Yet the US Department of Commerce - hardly an, ahem, unsympathetic ear to US companies - just found that those "massive" Chinese subsidies topped out at - that's right - a whopping 4.73 percent.
Taste the subsidy pain, America!
[Note: DOC's preliminary determination makes clear that the investigation does not cover the type of solar panels ("thin film") made by the poster-child for US "green subsidy" failures - Solyndra. While that little fact might matter for the ITC's injury determination in the solar panels case, it changes absolutely nothing here -Chinese "thin film" manufacturers undoubtedly received the same types and amounts of subsidies from the Chinese government.]
Thus, the Obama administration's primary scapegoat for the abject failure that is its "green energy" subsidy programs has just turned out to be a relatively insignificant factor in the US market - so insignificant, in fact, that even those directly harmed by any new CVDs (i.e., US consumers and investors in Chinese solar producers) openly celebrated DOC's big anti-subsidy announcement!
So even though the United States' preliminary CVD determination in the solar panels case could end up being pretty insignificant from a legal and practical perspective, it's pretty powerful evidence that the Obama administration's green energy policies have bigger problems than Chinese subsidies. Much, much bigger.
Time to get a new scapegoat, I'd say.