Tariffs on Chinese Solar Panels Boost USA Manufacturers

Efforts to boost USA production while protecting natural resources through anti dumping tariffs.

The news that the USA government is going to increase solar tariffs on Chinese cells was greeted by apprehension by the Communist State. However it may have the effect of boosting prices and even protecting the environment in the long run. On the 17^th of May the USA created a new tariff regime of as much as 250% on solar cells made in China. [1]

Local manufacturers were delighted by the decision because they had been literally driven out of the industry by the foreign competition. This could not come at a better time given the fact that the US unemployment rate continues to hover at about 8.1% with serious problems in the manufacturing sector. In an Election Year, the decision was virtually inevitable.

The critics are worried about the energy industry

There was a vocal contingent against the move. These naysayers argue that the tariffs may have the effect of increasing the price of these cells and actually hurting the renewable energy industry in the USA. Nevertheless the US Commerce Department was of the view that Chinese manufacturers were abusing the rules by selling cells at a price that was below the costs of production.

Antidumping duties are a very powerful tool when dealing with a strong manufacturing country such as China. The new duties will range from 31% to 250%. As expected the Chinese government was critical of the decision, claiming that it would hurt both nations. The reality is that the USA government can no longer allow China to destroy the local manufacturing base through blatant dumping.

Alternative green energy measures

In America, the drive towards Green energy continues. For example the BNEF is of the view that wind energy is becoming competitive when compared to the traditional sources of power such as coal and gas. This means that local consumers will have greater control over pricing as a consequence of an increased level of competition. There will be viable alternatives. 

Michael Lawn of the Bloomberg New Energy Finance project believes that the new tariffs will boost an industry in which up to 4 companies applied for bankruptcy in 2011. Shyam Mehta of GTM Research in Boston believes that the Chinese will find alternatives: “China-based manufacturers would certainly have to raise U.S. prices to turn a profit…This is likely to lead to module price increases in the U.S., which would serve to dampen demand and installation growth.” [2]

Protecting American industries and the environment

It is generally accepted that the Chinese government is boosting domestic production through the use of subsidies. By contrast, the free market approach in the USA faces considerable pressure. At the same time it is the stated objective of the Obama Administration to promote the use of ‘clean’ energy.

Originally this project was meant to boost environmental protection and local employment. The Chinese saw an opportunity and began to exploit it. Gordon Brinser at the SolarWorld US Summit summarized the issues: “Commerce today put importers and purchasers on notice about the consequences of importing illegally subsidized and dumped products from China”. He also argues that imposing tariffs creates a new balance.

The practical implications of protectionist policies

According to Mr. Brinser, the new regime creates “the possibility that domestic solar manufacturing, environmentally sustainable solar production and robust global competition might one day soon return, boosting U.S. manufacturing jobs”. [2] A case in point is Suntech Power Holdings which was told to pay 31.22% in levies. They are the world’s biggest solar panel maker and could easily devastate American manufacturers.

Many local manufacturers have been complaining about a raw deal especially in terms of the Chinese currency manipulation systems. ‘Green Energy’ was supposed to be a big thing for American manufacturers but the laxity of the rules meant that they were still losing out. These tariffs are designed to help those struggling domestic entrepreneurs.

Resources:

1. E. Goossens,” U.S. Solar Tariffs on Chinese Cells May Boost Prices”, 17^th May 2012, Bloomberg, http://www.bloomberg.com/news/2012-05-17/u-s-solar-tariffs-on-chinese-cells-may-boost-prices.html
2. G. Zapo,” Our Environmental Health”, 17^th May 2012, Technorati, http://technorati.com/lifestyle/green/article/our-environmental-health/