Wednesday, November 7, 2012

The Green Subsidies Mess Continues Apace

I'm sure I'll have plenty to say about last night's election results (other than an admission that my groundless prediction was obviously wrong), but tonight I'd like to focus on the latest reminders that the global mess surrounding green subsidies waits for no one man or election.

First, the US International Trade Commission unanimously found today that dumped/subsidized Chinese solar cells are injuring US solar manufacturers:
The United States International Trade Commission (USITC) today determined that a U.S. industry is materially injured by reason of imports of crystalline silicon photovoltaic cells and modules from China that the U.S. Department of Commerce (Commerce) has determined are subsidized and sold in the United States at less than fair value.

All six Commissioners voted in the affirmative.

As a result of the USITC's affirmative determinations, Commerce will issue antidumping and countervailing duty orders on imports of these products from China.
As you may recall, DOC last month released its final determination of pretty high antidumping and countervailing duties on Chinese imports, and DOC now will instruct Customs to start collecting those duties on a prospective basis.  And, of course, US solar panel prices will inevitably rise (if they haven't already).

While US consumers and the Chinese government will inevitably grouse about today's decision, I see several reasons why Beijing might not directly retaliate against the United States.  First, given the massive trade volumes at issue in this case and the ITC's unanimous vote in the preliminary phase, today's final vote shouldn't have come as a surprise  to anyone.  Second, Chinese exporters and US consumers actually scored a couple minor victories in this case: (a) DOC refused to expand the scope of the duties to include panels assembled in China but made from third-country inputs, and several Chinese producers have (apparently) already made contingency plans to export solar panels that are outside of the scope of the new US duty order; (b) the ITC today disagreed with DOC that "critical circumstances" exist in this case, and the duties will therefore not be assessed retroactively to 90 days before DOC issued its preliminary AD/CVD determination. If the ITC had agreed with Commerce, US importers could've been on the hook for millions of dollars in retroactively-applied duties. Third, this case is far from over: DOC's conduct in this investigation (and several others) is the subject of two new WTO disputes filed by China, and I wouldn't be surprised to see a US court appeal or two also emerge.

So maybe, just maybe, the US-China green subsidy fight won't be expanded dramatically in the wake of today's ITC vote.

On the other hand, it looks like the EU's own fight with China over green goods and subsidies is just cranking up.  In response to the EU's September initiation of separate anti-dumping and anti-subsidy investigations of Chinese solar panels, China initiated its own AD/CVD investigations of EU polysilicon.  If that sounds familiar, it should: in July China began similar cases against US (and Korean) polysilicon in apparent response to the US solar panels case.  However, unlike the US, the EU polysilicon case wasn't the end of China's response to Europe's solar investigation.  China also has filed a new WTO dispute targeting EU solar subsidies:
China has filed a WTO complaint over local content requirements under renewable energy feed-in-tariff programmes in certain EU member states, officials announced earlier this week. The surprise move comes just days after Beijing launched anti-dumping and countervailing duty investigations domestically over EU exports of solar polysilicon components to the Chinese market.

On the Chinese Ministry of Commerce website, ministry spokesperson Shen Danyang said that the People’s Republic had requested consultations with the EU and certain member states - including but not limited to Italy and Greece - under the WTO’s dispute settlement proceedings regarding allegedly unfair EU trade practices in the solar sector. According to Shen, electricity produced by EU-made solar components benefited from favourable feed-in tariffs in some countries, which in turn hurt the interests of Chinese producers locked out from such subsidies.
Interestingly, the Chinese WTO claim appears to be similar to one brought by - you guessed it! - the EU (and Japan) against Canada in relation to Ontario's "feed-in tariffs" for renewable energy.  The final Panel report in that case is due out soon, but rumors indicate that the Canadian government lost on most, but not all, aspects of the dispute.

So is a new Chinese dispute or polysilicon-like retaliation against the US in the works because of today's ITC announcement?  As mentioned above, I don't think so, but it's not out of the question.  Indeed, China already has a dispute teed-up in a final report by China's Ministry of Commerce (MOFCOM) which found that several US states provide prohibited subsidies to US manufacturers of solar panels and other green goods.  That report hasn't resulted in any formal action, but a WTO dispute would appear to be the logical next step if or when Beijing decides to respond to US green protectionism.  Maybe that won't happen tomorrow, but it'll keep hanging over Uncle Sam's head until those subsidies go away.

Regardless of what happens next, all of the stuff above makes clear that the global green subsidy mess - the duties, the litigation, the uncertainty and, of course, the economic problems - is showing no signs of abating any time soon.  While this might be good news for my paper on the subject, it's undoubtedly bad news for the many people urging the proliferation of environmental technologies, including US consumers and the struggling solar industry - in the United States, China and elsewhere.

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