Thursday, May 24, 2012

Kelly and Kevin Gallagher - Blinded by the (solar) light

Finally, the merits of the actual case are dubious. Prices of Chinese-made PV modules in China are lower than they are outside of China, so it’s hard to see how they are “dumping” on the U.S. market. The true problem is overcapacity, which market forces will correct in time. The Chinese government has undoubtedly provided support to its solar industry, but so has the US government with its loan guarantees, investment tax credits, and production tax credits. At the local level, SolarWorld Industries America (the lead filer of the complaint) itself received millions in tax breaks and subsidies in Oregon when it decided to locate its manufacturing facility there. Indeed, the Commerce Department only found evidence of small Chinese subsidies in its March 2012 ruling. SolarWorld only had six co-filers, but more than 100 U.S. firms lined up against it.
Chinese government support for solar energy has already benefited the world in terms of improved welfare, climate mitigation, and reduced global energy prices. The rest of us are essentially free-riding on this support. Rather than punish China for its laudable efforts, the Obama Administration should applaud it and do its part to correct market distortions too.
Read it at TripleCrisis
Blinded by the (solar) light
By Kelly Sims Gallagher and Kevin P. Gallagher

Follow up to the post on Misguided Mercantilism Hurts Solar Energy Consumers. Last night I was discussing this topic with an expert friend of mine who currently works in the Solar industry. He basically outlined this entire report making special note of the ability of Chinese firms to avoid the tariffs. While this lessens the negative impact, we ultimately agreed the policy is still a step in the wrong direction and risks unnecessary trade wars with China.


  1. While this may be stirring the trade war pot, one could make the case that (A) this won't hurt the industry or overall demand too much, as you mention, AND (B) it gives the global solar industry a strong push to more quickly pursue some sort of international solar trade agreement:

    The Solar Energy Industries Association (SEIA) is collaborating with the Chinese Renewable Energy Industries Association (CREIA) and other Asia-Pacific based trade associations on the development of a formal Solar Dialogue within the Asia-Pacific Economic Cooperation (APEC).

    The initial goals of these dialogues are to:

    - Promote WTO-acceptable trade in solar energy goods, while taking into account the unique and important role of governments in the development of the solar energy industry;

    - Ensure that global innovation, scaling, and economic development occur; and

    - Create a collaborative framework for preventing trade conflict in the solar industry and resolving it constructively if conflict does arise.

    Without the Commerce ruling, some stakeholders –*cough* China *cough* – might not have felt a need for such collaboration. So long-term net positive?

  2. Alex,

    Thanks for the info on SEIA's collaboration with CREIA.

    Although it's possible that stakeholders may now feel an urge to collaborate, only time will tell if that truly happens. While not impossible, it would be an odd dynamic and historical anomaly by which countries actively use protectionism in order to spark globalization.

    I remain skeptical that this outcome will be long-term net positive.