Trade frictions between two major economies may increase: Analysts
China is launching an investigation into imported US polysilicon used in solar panels, the Ministry of Commerce announced on Friday.
The probe relates to anti-subsidy and anti-dumping regulations, experts said, and will be seen as the latest sign of intensified trade frictions between the world’s top two economies.
According to its website, the ministry is also launching an anti-dumping probe on South Korean imports of polysilicon.
The ministry launched the investigations following complaints on July 2 from some domestic manufacturers, who claim they are being driven out of business because of the unfair US practices.
The investigation is scheduled to conclude on July 20, 2013 but is subject to an extension to Jan 20, 2014, the statement said.
“The ministry’s move is in response to the US anti-dumping and countervailing investigations into Chinese solar panels,” said Yao Weiqun, associate president of Shanghai WTO Affairs Consultation Center.
In a preliminary ruling in May, the US Department of Commerce imposed anti-dumping tariffs ranging from 31.14 percent to 249.96 percent on imported solar panels from China after it had imposed countervailing duties — also known as anti-subsidy duties — of 2.9 percent to 4.73 percent on Chinese panels in March.
The United States claimed that China carried out unfair trade practices by flooding the US market with government-subsidized products.
“China’s counterattack will influence the final ruling of the US investigations into Chinese solar products, but it’s hard to tell whether the influence is positive or negative,” Yao added.
The US Department of Commerce is scheduled to make a final ruling on its investigation into Chinese solar products in early October and the US International Trade Commission is expected to make a final decision in the case in late November.
Tu Xinquan, associate director of the China National Institute of WTO at the University of International Business and Economics in Beijing, agreed that China’s probe is in response to the US investigation into Chinese solar products.
Trade: Solar industry ‘needs level playing field’
After the US imposed tariffs on Chinese solar products, China’s solar exports dropped significantly and the industry continues to struggle.
“But China’s imports of solar-grade polysilicon maintained their growth after the US punitive tariffs, while imports came at low prices, which have dampened the domestic solar industry and injured domestic producers,” Tu said.
Statistics from the General Administration of Customs show that China imported 64,600 metric tons of polysilicon in 2011, up 36 percent from the previous year.
According to the average polysilicon price set by the market and fixed by long-term contracts — which comes to $40 a kilogram — China imported $2.59 billion worth of the raw material.
Sixty percent of those imports came from the US and South Korea.
In the first five months of the year, China imported 34,000 tons of polysilicon, worth $960 million. The US supplied 41.4 percent of that and South Korea supplied 22.2 percent.
“Because of the low price of polysilicon imports from the US and South Korea, 80 percent of Chinese polysilicon producers have been driven out of business, causing 5,000 workers in the industry to be out of work,” said Wang Bohua, secretary-general of China Photovoltaic Industry Alliance.
Amid a slowing recovery in the US economy, US presidential candidates, in election year, have made trade with China a major issue on the stump and trade frictions are more often politicized, according to Yao.
One recent so-called China-bashing move is that Harry Reid, the Senate majority leader, suggested burning Chinese-made team kits being used by US athletes at the London Olympics.
The US requested consultation with China on June 5 over duties China imposed in December on US-produced cars and sports utility vehicles with an engine capacity of at least 2.5 liters.
On the same day, US President Barack Obama — speaking to a small crowd in the manufacturing town of Maumee, Ohio, at the start of a two-day bus tour — said that the move was intended to “hold China accountable for unfair trade practices that harm American auto makers”.
China was the target of 40 trade investigations in the first half of this year, which involved export value of $3.7 billion, up 76 percent from the previous year.
Some 60 percent of the export value was measured on investigations involving developed economies, including the US, which started five trade investigations against China in the first half of this year.
“If China passes on the punitive tariffs on polysilicon imports, domestic players will win a level playing field and the young solar industry at home will be boosted,” Tu added.
“However, both China and the US should guard against politicizing trade issues because trade frictions benefit neither side. The two countries, indeed, can cooperate on the development of solar industry either as big producers or huge markets.
“Cooperation would also advance environment protection and energy conservation,” Tu said.
Jigar Shah, president of the Coalition for Affordable Solar Energy, a US group that represents solar installers, told Reuters that tariffs from either side cost jobs and make solar energy less competitive against fossil fuels, and “lowering, not artificially raising, the cost of solar should be a global goal”.