Next US-China Trade Dispute Puts US "Green" Subsidies in the Crosshairs... Again

Late last week the Chinese government announced new anti-dumping and countervailing duty (anti-subsidy) investigations of US and Korean imports of polysilicon - a primary input for the production of solar panels.

China is investigating whether exporters from the U.S. and South Korea sold solar-grade polysilicon below cost, a practice known as dumping, as part of a probe following complaints from four domestic companies.

The world’s biggest supplier of solar panels also started a countervailing duty investigation into the commodity from the U.S., China’s Ministry of Commerce said in two separate statements. The investigation, scheduled to last a year from today with the possibility of an extension to Jan. 20, 2014, will cover the 12 months from July 1, 2011.

The actions escalate a trade dispute between the world’s biggest economies after the U.S. said in May it will impose duties on Chinese solar cells, which are devices made from polysilicon and assembled into panels that convert sunlight into electricity.

As the article above notes, the new investigations are simply the latest in a long string of tit-for-tat trade disputes between the United States and China.  The US has conducted a boatload AD/CVD investigations of Chinese products over the last few years, and China recently began to respond in-kind - typically in response to US trade actions (like President Obama's "Section 421" tire tariffs).

In that regard, the polysilicon investigations are a bit different from recent Chinese AD/CVD cases on US chicken, steel and autos for two reasons.  First, China's initiation of these cases doesn't appear to be an immediate and direct response to any US action against Chinese imports: as noted above, the last major US act was the preliminary anti-dumping duties in May 2012 (although President Obama did recently announce WTO dispute challenging those Chinese AD/CVD measures on US autos).  Second, the Chinese polysilicon industry has been complaining about dumped and subsidized US imports for almost a year now and had been ratcheting up the pressure on China's Commerce Department (MOFCOM) over the last few weeks.  Thus, this latest set of Chinese AD/CVD investigations might not be - or at least appear to be - direct retaliation against US measures but instead a more standard trade remedies complaint against allegedly dumped or subsidized imports.

And speaking of those subsidies, the petition from the Chinese industry (available here and here) and the Chinese government announcement provide a laundry list of US state and federal subsidies to "green" industries that will be under investigation, including:

• Advanced Energy Manufacturing Tax Credit (federal)
• Refundable Photovoltaic Manufacturing Tax Credit (state)
• MEGA High-tech Tax Credit (state)
• High-tech Anchor Company Credit (state)
• Renewable Energy Renaissance Zones – Michigan Renaissance Zone Act (state)
• Alternative Energy Personal Property Tax Exemption (state)
• MEGA Standard Job Creation Tax Credit (state)

The petition and announcement are in Chinese, so it's a bit tough to parse everything, but I can see that the US states involved are Michigan, Tennessee, Idaho and Washington.

Of course, this is not the first time that China has complained about US subsidies to green manufacturers.  Back in May, MOFCOM released a preliminary report alleging that numerous state subsidies for renewable energy manufacturers violated WTO rules, but that report has not resulted in actual litigation (yet).  Of course, other countries have imposed anti-subsidy measures on US alternative energy imports - most notably biofuels (biodiesel in the EU, Peru and Australia and ethanol in the EU).  

So this latest Chinese investigation of US polysilicon is pretty much par for the green subsidy course.  The only real question is: given the depth and breadth of US green subsidies at all levels of government, how many more investigations (and eventual duties) are on the way?

(p.s. Yes, of course I'm aware that the Chinese government has more than its fair share of green subsidy shenanigans.  That doesn't really matter for tonight's purposes.)