What you Need to Know
News this
week that imports of Chinese solar PV into Europe is subject to registration
has brought the investigation into Chinese alleged anti-competitive practices
back into the spotlight. How might it affect the solar industry in Europe?
What is Dumping?
Dumping
sounds bad, doesn’t it? Like a bloke in
a battered truck is going to pull up outside your house and lob a couple of used
tyres, a tatty old pram and a carrier bag full of dog poo into your front
garden.
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| Plenty more where this came from |
In
international trade, dumping is defined as charging a lower price in an export market than is charged in the home country of the producer. It is seen as an anti-competitive
strategy aimed at driving competitors in the export market out of business in
an attempt to create a monopoly.
Governments
are allowed under international trade rules to protect their domestic producers
against such predatory pricing. To do so
they must prove that the pricing is below “normal value” and that the practice
is causing damage to the domestic industry in the importing country.
The Chinese Problem
China poses a
special problem for proving that the products are being
sold below normal value. Neither the USA
nor the EU considers China to be a market economy. The price for a product in China is therefore
not accepted as a fair market value.
The investigators
may chose to determine the normal value of the product by looking at the price
in a third country.
What Happened to Chinese Solar PV in the US?
In November
2012 the International Trade Commission (ITC) of the USA upheld the ruling of the Department of Commerce that Chinese exporters of solar photovoltaic cells
and panels were both receiving subsidy from the Chinese government and dumping
their products into the US at below normal value. The subsidy was assessed to be around 15% and
the dumping margin around 25%. The ITC
concluded that this had damaged the business of US-based solar manufacturers.
The news was
not all bad for Chinese exporters though, because a loophole was left open –
solar panels made in China from solar cells manufactured in other countries are
exempt from the duty. Many Chinese panel
manufacturers have simply moved cell production outside of China.
What’s Happening in the EU?
The process
in the EU is similar to the US, but with one difference. In addition to finding that
products have been dumped into EU markets at below normal value, and that EU
industry has been harmed, the Commission also assesses whether the imposition
of duties would be against the wider interests of the EU.
The
investigation was launched in September 2012, and will report preliminary
findings by June 2013 and conclusions by December 2013. A provisional level of duty can be applied to
imports in the period between June and December.
In the
meantime, from March, all imports of Chinese PV must be registered. This allows the EU to apply duty
retrospectively to solar PV imports between this date and the date of the preliminary
findings. This so-called "retro-active duty" is only
allowed only if there is a further substantial rise in imports – a rush to import before
the imposition of any duties.
So what’s the Most Likely Outcome?
It seems
likely that when faced with the same evidence as was presented in the USA, the
European Commission will reach the same conclusion, that Chinese PV manufacturers
have been receiving state subsidies such as preferential lending terms, tax exemption, and cheap materials, power and land. This support has allowed them to dump solar panels into Europe at
below cost.
The second
test would be whether the Chinese exports had damaged the European
industry. Prosun, the group bringing the
action against Chinese exporters lists 34 European solar PV manufacturers that have become insolvent since 2010, 25 of which closed in 2012. My guess is that there will be no question that Chinese competition
has damaged European manufacturers.
The final
test is whether the imposition of import duties would be against the interest
of the European Union, and this is where it
gets interesting. There’s no question
that lower prices for PV modules is of benefit to customers, and is also allowing
member states to meet their renewable energy targets at lower cost - at least
in the short term. Solar trade bodies
and installation companies fear that more expensive solar PV panels will result in
a loss of demand for their services and are dead set against anti dumping
tariffs. They have organized around a
group called the Alliance for Affordable Solar Energy.
Their
argument is persuasive – so what if the Chinese want to subsidize European
solar installations – why not let them?
A clue to the thinking at the European Commission is on a fact sheet that has been published on the case:
“Potentially unfair trade in solar panels does not
help the environment: a market that faces dumped imports will drive local
producers out of business and could discourage EU producers from developing
cutting edge technologies in the renewable energy sector. As well as the very
significant loss of jobs, dumping and other unfair trade practices can
ultimately lead to less competition and eventually price increases. We do not
know yet if that is the case here, but that's what the investigation is
designed to find out.”
I’m not a
betting man, but if you forced me to come off the fence, I’d probably guess
that the price of solar PV in the European Union is set to rise. What do you think?
