World Trade Organization Rules Against US Solar Tariff

by Rona Fried

Remember the tariffs the US imposed on Chinese solar manufacturers because they flooded the market with solar panels so cheap that no one could compete?

The World Trade Organization (WTO) just ruled the decision illegal and it goes beyond solar panels to many other products such as  steel. 

China filed a complaint with the WTO about the tariffs in 2012. Although countries have the right to impose tariffs when goods are "dumped" on them at below market prices, there must be proof that domestic producers are harmed by it and that it’s not simply a case of protectionism, says WTO.

When the US imposed the tariff, Chinese manufacturers simply shifted assembly of solar panels to Taiwan (only the finished modules are covered). Since then, that loophole has been closed and the EU also ended up imposing tariffs.

The tariff is now working as intended. Really cheap Chinese panels no longer have a hold on the market and prices have risen enough to support the financial viability of a much larger range of solar manufacturers around the world. Because of this, solar manufacturing could take hold in the US again and prices have dropped so much over the past five years that they are still cheap.

The issue has divided the solar industry and installers are cheering WTO’s decision. Tariffs average 27% – the industry expects solar panel prices to rise by 10-20%.

The fall of average solar system prices:

But there are downsides to insisting on the cheapest panels possible. Because of lavish Chinese subsidies for its solar manufacturers, we saw most of the world’s pioneering companies fold, from Q-Cells and Solar Millennium in Germany to Energy Conversion Devices and Evergreen Solar in the US. The infamous Solyndra debacle happened because they couldn’t compete on price.

And there have been reports of declining quality of solar panels because they are so cheap. The pioneers produced high quality products that launched the solar industry.

The US is weighing its options, says Michael Froman, US Trade Representative. China, of course, is thrilled. "China urges the United States to respect the WTO rulings and correct its wrongdoings of abusively using trade remedy measures, and to ensure an environment of fair competition for Chinese enterprises," its statement says.

Solar trade associations are calling for a negotiated end to this controversy. "We’re strongly urging all parties to set aside their grievances; redouble efforts to find a solution that benefits all segments of the industry; and end this potentially costly and divisive conflict," says Solar Energy Industries Association (SEIA).

Here’s our background on the Chinese solar tariffs.  

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Rona Fried is CEO of SustainableBusiness.com