Upcoming Solar Power International 2012 & Reaction to Jugar Shah’s Statement On European Investigation Into Chinese Solar Cell Exports

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Dear Friends & Readers/Visitors/Viewers,

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As I’ve remarked at the end of yesterday’s (September 8, 2012 post of http://www.sunisthefuture.net) post, “we need to try harder in order to have a bright and sunny day tomorrow” and furthermore, we need to shift our focus/attention toward constructive rather than destructive direction, changing our paradigm to the possibility of infinity rather than forever operating from/playing a zero sum game of finite competition !  We are living in a critical time in human history; we are all part of a great turning  of a fundamental shift in the way we live on this planet, whether we are American, Chinese, or European.  We need to keep our eyes on the prize/gift of  the fact that cost of solar is now competitive with fossil fuels and will offer a future of hope and optimism rather than a future of doom and gloom.

The practice of dumping, anti-dumping tariff, etc. is nothing new. It occurred in the auto industry, steel industry, etc. historically.  That is why there had been General Agreement on Tariffs and Trade among international/world trade scene. I would like to invite you to visit some historical background on Dumping practice and pricing policy.

Actions in the United States

In the United States, domestic firms can file an antidumping petition under the regulations determined by the United States Department of Commerce, which determines “less than fair value” and the International Trade Commission, which determines “injury”. These proceedings operate on a timetable governed by U.S. law. The Department of Commerce has regularly found that products have been sold at less than fair value in U.S. markets. If the domestic industry is able to establish that it is being injured by the dumping, then antidumping duties are imposed on goods imported from the dumpers’ country at a percentage rate calculated to counteract the dumping margin.

Related to antidumping duties are “countervailing duties“. The difference is that countervailing duties seek to offset injurious subsidization while antidumping duties offset injurious dumping.

Some commentators have noted that domestic protectionism, and lack of knowledge regarding foreign cost of production, lead to the unpredictable institutional process surrounding investigation. Members of the WTO (World Trade Organization) can file complaints against anti-dumping measures.

Actions in the European Union

European Union anti-dumping is under the purview of the European Council. It is governed by European Council regulation 384/96. However, implementation of anti-dumping actions (trade defence actions) is taken after voting by various committees with member state representation.

The bureaucratic entity responsible for advising member states on anti-dumping actions is the Directorate General Trade (DG Trade), based in Brussels. Community industry can apply to have an anti-dumping investigation begin. DG Trade first investigates the standing of the complainants. If they are found to represent at least 25% of community industry, the investigation will probably begin. The process is guided by quite specific guidance in the regulations. The DG Trade will make a recommendation to a committee known as the Anti-Dumping Advisory Committee, on which each member state has one vote. Member states abstaining will be treated as if they voted in favour of industrial protection, a voting system which has come under considerable criticism. (Source: J. Eggert,http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_129812.pdf)

As is implied by the criterion for beginning an investigation, EU anti-dumping actions are primarily considered part of a “trade defence” portfolio. Consumer interests and non-industry related interests (“community interests”) are not emphasized during an investigation. An investigation typically looks for damage caused by dumping to community producers, and the level of tariff set is based on the damage done to community producers by dumping.

If consensus is not found, the decision goes to the European Council.

If imposed, duties last for five years theoretically. In practice they last at least a year longer, because expiry reviews are usually initiated at the end of the five years, and during the review process the status-quo is maintained.

Chinese economic situation

The dumping investigation essentially compares domestic prices of the accused dumping nation with prices of the imported product on the European market. However, several rules are applied to the data before the dumping margin is calculated. Most contentious is the concept of “analogue market”. Some exporting nations are not granted “Market Economy Status” by the EU: China is a prime example. In such cases, the DG Trade is prevented from using domestic prices as the fair measure of the domestic price. A particular exporting industry may also lose market status if the DG Trade concludes that this industry receives government assistance. Other tests applied include the application of international accounting standards and bankruptcy laws.

The consequences of not being granted market economy status have a big impact on the investigation. For example, if China is accused of dumping widgets, the basic approach is to consider the price of widgets in China against the price of Chinese widgets in Europe. But China does not have market economy status, so Chinese domestic prices can not be used as the reference. Instead, the DG Trade must decide upon an analogue market: a market which does have market economy status, and which is similar enough to China. Brazil and Mexico have been used, but the USA is a popular analogue market. In this case, the price of widgets in the USA is regarded as the substitute for the price of widgets in China. This process of choosing an analogue market is subject to the influence of the complainant, which has led to some criticism that it is an inherent bias in the process.

Now that we do have a more clear picture of what is going on, let’s approach the issue rationally and calmly. I do agree with Jigar Shah that “the last thing the US and European solar industries need is the further escalation of a trade war in which there is no winner”, but SolarWorld is operating within its right to file for complaints or request for investigation. This is all part of the process for transparency in a democratic society.  But it is important to note that the process of choosing an analogue market is subject to the influence of the complaint and may be inherently biased.  This issue needs to be carefully addressed and requires a group of independent and fair minded individuals to help to reach the right decision.  Sometimes threats/sabre rattling (be it from China or Europe or USA) is the best way to insure that all parties involved will look at the matter seriously for its eventual decision may have a great deal of consequence, more than just the immediate industry or country involved, but on a global scale, its security, safety, prosperity, and longevity .

Another point:  Criticisms have argued that it is quite unreasonable to compare China’s goods price to the USA’s as analogue. China is now developing into a more free and open market, unlike its planned-economy in the early 60s, the market in China is more willing to embrace the global competition now.  Instead of only depending on its cheap labor source,  China is now a true contender on the world commerce scene from many perspectives.  Then, it is thus required to improve its market regulations and conquer the free trade barriers to improve the situation and produce a properly judged pricing level to assess the “dumping” behavior.  Think of this as  growing pain…the difference between treatment toward a baby or growing tiger/ elephant/growing human versus treatment toward fully grown tiger/elephant/adult human.   It is incumbent upon those who have already participated/competed many decades on the world scene to indoctrinate carefully/patiently  those who are  joining the club more  recently.  Henceforth, the true sign of leadership from Chinese Premier Wen and German Chancellor Merkel need to be followed. It is far wiser to continue the dialogue, discussion, or implementing measures that focuses on cooperation rather than retaliation, for I believe that all of us have the common goal  for the future of our planet to be clean, healthy, prosperous, and free from war.

Perhaps the SPI (Solar Power International) 2012 (Sep. 10-13, 2012, Orange County Convention Center, Orlando, FL) will be a great place for discussions of cooperations to be taking place. Lastly, I’d like to call to the attention that part of the solution will also lie in improving market for all by increasing the demand for solar installations. I can not think of any better incentive policy than effective Feed-In-Tariff in accomplishing this goal.  So home owners, solar businesses, policy makers, and lobbyists, please consider and ask for the implementation of effective Feed-In-Tariff !  Let’s all take part in pushing through the inflection point on this curve of solar growth/transition. Let’s all march toward the future of Renewable Energy Age !

~have a bright and sunny day~

researched, written, and posted by sunisthefuture-Susan Sun Nunamaker, sunisthefuture@gmail.com
Homepage: http://www.sunisthefuture.net


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