The National Football League’s officiating controversies have been the source of heated water-cooler conversations during the past couple weeks, particularly among Packers fans after Green Bay’s controversial loss to Seattle. The frustration is understandable. The rules of the game exist to ensure that both teams compete fairly on a level playing field. When the rules aren’t applied, or are applied incorrectly, one team gains an unfair advantage over the other.
That happened to the Packers, and unfortunately, that is precisely the situation now facing America’s solar manufacturing industry as it competes against China in the global marketplace.
Helios, a Milwaukee-based solar panel maker, joined with other solar manufacturers last year to call China to task for illegally subsidizing and dumping solar products in the U.S. at prices so artificially low that many U.S. manufacturers are unable to compete. This is forcing American manufacturers to close facilities and is causing thousands of workers to lose their jobs.
The evidence is compelling. Prior to 2011, American solar manufacturers were a top competitive player in the global solar marketplace with U.S. solar trade exports amounting to $2 billion worldwide. That changed suddenly last year when China’s exports of solar cells and panels surged 135 percent to $2.8 billion while the U.S. swung to a $1.6 billion global solar trade deficit.
Earlier this year, an investigation by the Commerce Department determined that Chinese manufacturers were not only guilty of illegally dumping solar cells and panels into the U.S. market, but that they also benefit from more than a dozen illegal subsidy programs. A final determination of the extent of China’s illegal trade practices is expected in a few days.
This is a positive step forward for U.S. solar companies and the prospect of a stronger American solar manufacturing industry that can help more Americans back to work. But a small yet significant loophole in the way Commerce has preliminarily defined the scope of its investigation threatens to take America two steps back by undermining trade remedy laws applied in this case.
In its preliminary decision, Commerce excluded from the scope of its investigation those Chinese solar panels that are produced from non-China-manufactured solar cells. This despite the fact that the lavish subsidies China provides its solar manufacturing industry to produce these panels and China’s dumping of these panels in the U.S. market are what have been decimating American solar manufacturers.
This omission is a critical technicality that gives China an opening to flaunt trade remedy laws by exploiting just one step in the solar panel manufacturing process. For example, China could manufacture crystals and use them to produce the wafers needed for solar cells, but then send those wafers to another country to actually manufacture the cells. It could then import those solar cells and use them to produce solar panels. In this situation, about 70 percent of the solar panel is produced by China, but it would nevertheless be exempt from anti-dumping or countervailing duty penalties.
And Chinese solar panel manufacturers know it. During a New York Times interview, the president of a company that imports solar panels stated, “Chinese manufacturers wanted to keep wafer production in China, but were making plans to ship wafers to Taiwan or South Korea for conversion into solar cells as one way to potentially avoid any new tariffs the United States Department of Commerce might decide to impose.”
Commerce cannot allow this to happen by omitting a critical stage in the solar manufacturing process from its investigation. U.S. solar manufacturers such as Helios are playing by the rules of fair trade. We need Commerce to ensure that China and other countries do the same.
President Obama and Governor Romney are right to demand that China play by the rules in the global marketplace. But unless Commerce closes this damaging loophole, China will have a way to circumvent the rules of fair trade, and American solar manufacturers and workers will continue to suffer.
Steve Ostrenga is CEO of Helios Solar Works of Milwaukee, Wisconsin.
[Helios is a member, along with SolarWorld, of CASM, the coalition which launched the antidumping and countervailing duties claims against Chinese-made solar panels. --- Editor]