To read the full issue brief, click here.
Washington, D.C. — With China’s Vice President Xi Jinping expected in Washington next week and the U.S. Department of Commerce’s expected March ruling on one of the biggest trade cases to hit the U.S.-China energy relationship in recent years, the Center for American Progress released “Shining a Light on U.S.-China Clean Energy Cooperation,” which addresses the best ways to ensure that America’s competitive edge is not eclipsed by the Chinese government’s deployment of massive resources toward their own renewable energy technology, many of which are designed for export.
Seven U.S. solar companies claim that the Chinese government unfairly subsidizes Chinese solar panel manufacturers to enable those companies to sell their products at below-market prices and drive U.S. competitors out of the market. The seven companies support subsidy and dumping petitions filed by SolarWorld Industries America Inc. against Chinese solar imports in October that ask the Commerce Department to levy triple-digit tariffs on solar cells and modules imported from China. The U.S. trade petition claims that China’s subsidies are designed not just to support infant industries but also to undercut competitors so that China’s domestic enterprises can take over a larger share of the global market.
“Divisions among U.S. companies have attracted a lot of attention in this case, but the real issue we should be concerned about is China,” said Melanie Hart, CAP Policy Analyst on China Energy and Climate Policy. “The Chinese government takes a coordinated approach to trade, but the United States does not, and that means when problems emerge, U.S. companies are forced to square off alone against a massive Chinese state. David-versus-Goliath trade battles are generally a losing proposition, so most companies decide it is safer to let Chinese rule-breaking slide. The result is tacit accommodation to what appear to be increasingly unfair trade practices, and that erodes U.S. competitiveness.”
China is particularly good at making things cheaply. At the lower end of the value chain, that is primarily due to the country’s low labor costs and massive supply chains. Also advantageous are China’s lax labor, safety, health, and environmental standards. At the higher end, that is often because the Chinese government provides generous subsidies and other forms of support for high-technology research, development, and commercialization. Low-cost Chinese manufacturing plays a large role in driving prices down for a wide range of products, including renewable energy technologies. Chinese manufacturing also plays a large role in pricing some U.S. manufacturers out of business, with many of those manufacturers claiming that the “China price” is driven by Chinese government intervention rather than natural market forces. If the Chinese government is intervening in a way that breaks trade rules then that type of rule breaking should be remedied in some way.
The United States has much to gain from cooperating with China on clean energy. As the world’s fastest- and largest-growing energy market, China is an ideal testing ground for scaling up and commercializing clean energy technologies. Combining our two energy markets increases economies of scale to bring down costs for consumers in both countries. But the China we are dealing with today is not the same China we were dealing with 10 years ago—now China is moving up the value chain to higher-end technology. They are aiming to compete with us in highly engineered, capital-intensive industries such as solar photovoltaic, or PV, systems, where the United States has long enjoyed a comparative advantage.
Ensuring that the Chinese play by the rules will require more policy coordination on these types of bilateral trade disputes here in the United States. The Obama administration’s new trade enforcement initiative is a critical step in that direction. But it is only a first step. Other steps may be identified once the new Trade Enforcement Unit is up and running—steps both bilateral and international in scope that can help the United States and China better manage this critical bilateral trade relationship for the benefit of the global economy. This issue brief will give an overview of the current solar PV trade dispute to highlight the larger challenges we face.
To read the full issue brief, click here.
To speak to Melanie Hart, please contact Christina DiPasquale at 202.481.8181 or [email protected].
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