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Washington, D.C. — The Center for American Progress today released “5 Myths and Realities About U.S. – China Solar Trade Competition,” ahead of tomorrow’s U.S. Department of Commerce announcement of its preliminary ruling on an “anti-dumping” petition filed by SolarWorld Industries America, Inc. against Chinese solar panel manufacturers. In this column, CAP’s Melanie Hart and Kate Gordon present the reasons why the United States needs to display a steady hand in its solar trade dispute with China.
- MYTH: Trade enforcement is a losing proposition because imposing tariffs will slow solar industry growth in the United States.
REALITY: Innovation and demand-side policy, not cheap imports, are the real keys for solid and sustainable solar growth in the United States.
- MYTH: U.S. manufacturers should accept that they cannot compete with China.
REALITY: The United States is actually quite strong in higher-end manufacturing.
- MYTH: Imposing tariffs would trigger a trade war with China, and that must be avoided at all costs.
REALITY: Maintaining a mutually beneficial trade relationship requires a steady hand, and fearful capitulation is not a winning strategy.
- MYTH: The U.S. solar market would be much better off if SolarWorld would drop the petition and allow the U.S. government to negotiate a private solution with China.
REALITY: If U.S. companies drop trade petitions in response to China’s real or implied threats then capitulation wins out over negotiation—and capitulation is a losing game.
The bottom line is that a true negotiated agreement with China, if China is indeed violating its trade obligations, would result in the United States extracting some array of promises or concessions from China—ideally promises to remove the policies that caused the trade frictions in the first place. If that is our end goal, then we should let the Commerce Department process play out first. If that process results in very low tariffs, then we can assume that China’s behavior does not warrant high-level political negotiations. But if the tariffs are significant, then we have a clear signal that there is something to negotiate about—and we will subsequently be at a good starting point for negotiations, because the Chinese government will be keen to find a solution less onerous than the high-tariff status quo.
The Chinese government will certainly do everything in its power to strengthen its negotiating leverage in bilateral trade disputes. We should do the same.
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