US Lawmakers Challenge China on Solar Subsidies

19 October 2011

Chinese subsidies to solar panel producers are increasingly drawing attention from US lawmakers, as Washington deals with the aftermath of US solar panel maker Solyndra's bankruptcy filing last month. At a news conference on Friday 14 October, Sander Levin - the top Democrat on the powerful House Committee on Ways and Means - called for the US to step up and protect its solar industry from Chinese competition.

Levin, speaking at a news conference regarding China's alleged currency manipulation, insisted that "there has to be action taken on solar." One option, Levin suggested to reporters, would be to impose safeguard measures against imports of Chinese solar panels.

Safeguard measures are used to temporarily restrict imports of a product if a country's domestic industry is injured or threatened by an import surge.

Beijing has repeatedly come under fire in recent years for providing extensive support to its clean energy producers, which critics in Washington claim puts foreign competitors at a disadvantage. In June of this year, China brought to an end a controversial public fund for wind power manufacturing; the US had alleged that the subsidies were prohibited for being contingent on the use of local input (see Bridges Weekly, 8 June 2011).

The call by Levin to target Chinese subsidies comes in the wake of US solar panel maker Solyndra's bankruptcy filing in September.

The high-profile Solyndra collapse has caused some US observers to question the financial viability of green technologies, and led many to criticise the administration of US President Barack Obama for having provided the California-based company with over US$500 million in a government guarantee - a guarantee that the company might not be able to pay back.

Until its bankruptcy filing last month, the company had been touted as an example of clean technology's potential in the US. Falling prices caused by Chinese exports have been blamed not only for Solyndra's downfall, but also for the bankruptcy filings of US companies Evergreen Solar and SpectraWatt.

Levin's comments also come just over a month after US Senator Ron Wyden, a Democrat from the US state of Oregon, sent a strongly-worded letter to Obama urging action on the subsidy issue.

"Please know that if your administration is unwilling to take the appropriate steps, with haste, I will advance a legislative effort, as provided by the U.S. trade remedy laws, to ensure that the American solar industry is not harmed by unfair trade," Wyden said.

However, Senator Orrin Hatch, the top Republican on the Senate Committee on Finance - of which Wyden is also a member - recently refuted the suggestion that China alone was to blame for Solyndra's downfall.

"Solyndra tried to make solar panels, but ran up their costs far higher than even domestic competitors," Hatch said. "Of course, the failure was blamed on China, but if you cannot even outcompete US companies, it wasn't foreign competition that ruined your business, it was simply a failed business model."

Clean energy subsidies could face questions on home front and at WTO

Solar manufacturers have also taken up the call against China's domestic support policies, with some of these producers reportedly banding together to prepare a US trade complaint against China. According to Bloomberg, the case will soon be filed at the US Department of Commerce and the US International Trade Commission, and would be one of the largest targeting Beijing.

China's clean energy subsidies were also the subject of a submission made earlier this month by US Trade Representative Ron Kirk to the WTO. In the submission, Kirk identified nearly 200 subsidy programmes that the US claims China has failed to notify the global trade body, along with 50 Indian subsidy programmes.

"The situation was simply intolerable," Kirk said. "Every member of the WTO is required to come clean on its subsidy programmes on a regular basis."

Whether or not the US will actually pursue a WTO dispute on the subject was not made clear at the time of the USTR's announcement.

China currency issue lurking in the background

The solar subsidies controversy comes at a time of increasing Sino-US tensions regarding the US' growing trade deficit with China and an ongoing attempt in Congress to pass legislation targeting China's valuation of its currency (see related article in this issue).

A bill that would allow the US to impose duties on countries that undervalue their currencies has already passed the US Senate with bipartisan backing, and reportedly has widespread support in the House (see Bridges Weekly, 12 October 2011). However, House Republican leadership is refusing to bring the currency legislation up for a vote, drawing intense criticism from Democrats. At Friday's news conference, Levin urged that Speaker of the House John Boehner, who opposes the legislation, put aside his objections and "let the House work its will."

The White House has been reticent to get involved in the currency issue; however, the Senate vote has already drawn a harsh rebuke from Chinese government officials, who have alluded to the possibility of a "trade war" if the legislation becomes law.

Proponents of the currency legislation insist that China's strict control of the yuan, also known as the renminbi, acts as an export subsidy that makes Chinese products cheaper than their foreign counterparts. Critics of the legislation argue that targeting China's currency will only cause jobs to move to the next low-cost place, such as Bangladesh or Vietnam, rather than return to the US.

ICTSD reporting; "Blame-China Imports Chorus Grows as Solyndra Falls," 28 September 2011; "Solar-Panel Imports From China Said to Face U.S. Trade Complaint," BLOOMBERG, 28 September 2011; "Dems on China bill: Let the House ‘work its will'," THE HILL, 14 October 2011; "Unlike Solyndra, other California solar projects appear on track," LOS ANGELES TIMES, 15 October 2011; "200 Chinese Subsidies Violate Rules, U.S. Says," NEW YORK TIMES, 6 October 2011; "Dark clouds threaten solar makers' future," REUTERS, 16 October 2011; "Lawmaker urges action against solar panel imports," REUTERS, 14 October 2011.

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