September 26, 2020

U.S. and European Union to Negotiate Settlements in Chinese Solar Panel Cases

HONG KONG — The Obama administration and the European Union have each decided to negotiate settlements with China in the world’s largest antidumping and antisubsidy trade cases involving China’s roughly $30 billion a year in solar panel shipments to the West, officials and trade advisers in Beijing, Brussels and Washington said.

The plan that is starting to take shape would essentially carve up the global solar panel market into a series of regional markets. It would sharply raise the price of solar panels exported from China, the world’s dominant producer, by requiring Chinese companies to charge more while limiting the total number of solar panels they could ship.

In exchange, Chinese companies would no longer be charged steep taxes on their exports of solar panels. The United States is already collecting tariffs totaling about 30 percent while the European Union is expected to impose similar tariffs of about 50 percent on June 5, and may backdate them to March 5.

Parallel decisions by the Obama administration and the European Union to separately negotiate high prices for imported solar panels may prove unpopular among environmentalists. Some environmental groups are already upset that the tariffs have made solar energy less affordable, which makes it less competitive with more polluting fossil fuels.

Huge shipments from China have driven solar panel prices down by three-quarters in the last four years. American and European producers contend that much of that decline represents the effect of Chinese government subsidies and Chinese dumping of solar panels below the cost of producing them, which means that a negotiated settlement could need to push prices up significantly.

The goal of the current tariffs, and of the price and quantity regulations that could replace them, is to protect American and European manufacturers from what they and the Obama administration describe as unfair competition. Western manufacturers and the administration say that Chinese solar panels are heavily subsidized by the Chinese government and then dumped in foreign markets at prices far below the cost of production.

Two dozen American and European solar panel manufacturers have already cut back production or gone bankrupt in the last three years, moves widely attributed to Chinese imports.

Francisco Sanchez, the under secretary of commerce for international trade, has just flown to Beijing for a visit to discuss civilian nuclear power trade issues, people with a detailed knowledge of his visit said. Mr. Sanchez has a long agenda of bilateral trade issues to discuss that includes mentioning an American interest in negotiations, a person with detailed knowledge of his visit said.

The Commerce Department deferred on Monday to the United States trade representative’s office about what Mr. Sanchez would say in Beijing about solar panels.

The Obama administration is in the earliest stages of sounding out Congress about the shift toward replacing tariffs with a negotiated settlement. Senator Ron Wyden, the Oregon Democrat whose state is a center of solar panel production, said that he supported a negotiated deal.

“We are really at a fork in the road with respect to producing renewable energy technology in the United States,” he said. “This is the moment for the administration to obtain a global agreement that levels the playing field for American producers and provides the certainty needed for America’s renewable energy, and solar sector in particular, to survive.”

Chinese producers have partly bypassed the American tariffs by performing one stage in the solar panel manufacturing process outside mainland China: turning solar wafers into solar cells in nearby Taiwan.

A negotiated deal would close the loophole in the American tariffs; the European trade case does not have the same loophole.

China has retaliated for American and European tariffs on solar panels by moving to impose steep tariffs on imports of the main raw material for solar panels, polysilicon. A negotiated settlement would also involve China’s removal of these retaliatory tariffs.

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