Anti Dumping Solar Energy

Solar World is one of the world’s largest solar energy businesses with about 2,700 employees. It has been the largest solar panel manufacturer in U.S. For over 35 years. Solar World operates in U.S. And Germany and has sales offices in all of world’s solar markets. The company devotes itself exclusively to the business of solar energy. It also combines all the stages of photovoltaic value chain from the raw material polysilicon to module production, from trade of solar panels to construction and promotion of turnkey solar power plants. With much heavy investment in this business, the company wants to capture the market with its products.

However, Chinese manufacturers have started with the policy of dumping. Their products are exported at a much lower price as compared to the price of those products in their home market. These lower prices, being more attractive, were an attempt to get hold of a larger, more superior market. This endeavor proved to be stab for Solar World. With such grave asset at stake, Solar World decided to seek protection by the phenomenon of anti-dumping. Anti-dumping primarily gives protection to the local manufacturers against the foreign ones. The protection, on the other hand, is temporary and the infant industries (In this case, it is Solar World) have to mature and become workable without protection. They are also supposed to make sure that their profits are more in cost than the protection

Solar World submitted a petition in the U.S. Department of Commerce and U.S. International Trade Commission in protest to Chinese photovoltaic manufacturers dumping products to capture the market. In the four-volume petition, Solar World along with its allies have accused Chinese photovoltaic industry of inundating the U.S. market with dumping solar cells and panels to systematically gain a higher market share. This dumping is therefore deemed as “an unfair trade practice.”

According to the WTO’s agreement, this act is legal because according to this agreement if dumped prices of the imported goods cause injury to the local domestic industry in the territory of the importing contracting party then application of measures like anti-dumping is legitimate. Therefore, Solar World’s anti-dumping was, while legal; it had its quirks and benefits.

Advantages of Anti-Dumping: Anti-dumping, is a form of minor fortification. However, there is adequate caution in the application of anti-dumping rules that it has become relatively an easy source of protection when foreign price rivals injure a domestic industry. A good number of economists support protectionism for infant industry when there is external advantage. As China moves up the economic ranking, U.S. can gain heaps of benefits if handled well. For example, China’s burgeoning domestic industry can be a major source of consumers for the U.S. manufactured goods. But U.S. has to make sure that it does not give up significant employments to the Chinese in solar manufacturing, as in other U.S. industries. If U.S. do not protect its infant industries against unfair competition then by year 2035, 80% of electricity in United States would be dependent on foreign supply that could raise the price when the market reaches that capacity. In fact, many economists say the principal cause of Great Depression in U.S. And around the globe.

Disadvantages of Anti-Dumping:

The price in U.S. fell by 50% due to lower costs of Chinese panels. This reduction resulted to at least a dozen closed down plants and laid off workers. The tariff on Chinese imports would ultimately raise the price and that would turn out to be overall employment eradicator. Having said that, the U.S. gives a chance to ramp up productions and drive down costs through research and development, and modernization then that would be generating jobs for installers in a sustainable manner.

What the Chinese rivals would do: Also, the Chinese cell manufacturers would then be incentivized to outsource third-party companies in order to get around the duties. The Chinese rivals would then come into scene. A popular option would then be to utilize cells manufactured in Taiwan. This will allow the Chinese manufacturers to avoid the high tariff ranging from 34 to 250%. However, this strategy would also add 10 to 12% additional costs of the modules based on the margins required by third-party contract manufacturers and from additional logistic charges.

In case of retaliation of Chinese manufacturers: The United States is still an important supplier of polysilicon (raw material of photovoltaic industries) and CSPV manufacturing machinery. Upon application of a measure like anti-dumping, U.S. will lose one of its important consumers because of the possibility that Chinese manufacturer would then ramp up their own production of polysilicon and turn to Germany or Switzerland to fill the equipment gap by simply cutting out the U.S. firms that are still competitive in solar supply succession. To diminish this risk, Solar World should even the score with European manufacturers by taking this anti-dumping case to European commission’s competition agency.

Despite the good and the bad aspects of anti-dumping, there are still some ways through which Solar World can tackle these issues. Following are some suggestions for Solar World and their pros and cons.

Suggestions:

Solar World should use a mix of non-market strategies such as lobbying, petition and use of WTO (World Trade Organization) to minimize the damage from price dumping.

The U.S. should develop an industrial, which can level the playing field. The scale of U.S. efforts is nothing as compared to the Chinese incentives.

Recommendations: Solar World and other U.S. manufactures that filed in this case should lobby for these policies:

Policies should be made which are stable, long-term and support market side and it should include national Renewable Clean Energy Standards (RES). Programs, which give incentive to buyers, should be introduced while also giving incentive to the sellers such as property and sales tax credits.

Pros: As the recommendation says, policies should be long-term, which will bring stability in the market. Domestic market will flourish because incentives are given on both sides and so that will prove to be a good thing.

Cons: Setting grounds in international market will be comparatively difficult, as buyers will not necessarily be getting any incentives

Increase funds for both manufacturing infrastructure development and research and development of the U.S. solar industry.

Pros: Increased funding in research and development will ultimately result in better technology and lower prices, which will help America to survive and compete in International market. With more funds in hands, development on infrastructure will speed up, quickly coping up with the demand of the market.

Cons: Research and development takes time and so does the development process therefore I would consider these benefits as long-term.

Establishment of research and development tax credit on a long-term basis to make sure solar manufacturers achieve greater consistency in tax and investment planning.

Pros: Manufacturers would minimize their tax liabilities in turn maximizing returns.

Cons: The results will not come out immediately additionally great care should be taken while investment planning and several factors should be kept in mind such as availability of surplus funds for investment, degree of risk and rate of return.

Create federal Green Bank to supplement photo voltaic and other eco friendly energy generation projects, specially for manufacturing and bring back the Advanced Energy Manufacturing Tax Credit (MTC)

Pros: Advanced Energy Manufacturing Tax Credit will help Americans in terms of creation of more jobs and it will add the capacity to locally build clean and sustainable energy projects with domestic parts. The amount of renewable energy production will increase within few years, which in turn will reduce carbon emissions. In 21st century economy, this will keep America competitive with rest of the nations.

Cons: Tax credits might not last forever so firms should take as much advantage as possible. Foreign firms can outsource their work and take advantage of Advanced Energy MTC.

Use these Tax Credits to create standard to addresses universal requirements for interconnection of elements and their impact on network distribution systems. Abnormal conditions, power quality, islanding, and test specifications and requirements for design, production and lastly standards for disposing panels to keep environment clean.

Pros: Using Tax Credits to maintain standards will bring uniformity among various firms who are producing equipments for renewable energy

Cons: Following the standards and proper disposal will increase cost but it would save the environment

Work with foreign counterparts and the WTO to develop a strong, effective and enforceable rules-based international trading system that promotes free and open trade.

Pros: No tariff and duty would be imposed on exporting and importing respectively which will result in lower prices.

Cons: With free trade system, it becomes hard to impose anti-dumping strategies.

Get intellectual property and grand equity and take that to WTO

WTO acts a platform where all member companies can go settle their disputes with the help of negotiations.

Pros: This will have positive impact on trade overall thus standardizing its procedures and facilitating its members.

Cons: Every trade organization is not part of WTO and even if they are, they have to some amount in order to retain themselves as members of WTO.