Another Trade War Angle
Pricing saps innovation
Chinese trade practices are being used like a “battering ram” to destroy overseas competition, in the words of one securities analyst.
The analyst says China is playing the long game, in which short-term arguments about pricing capture most of our attention in the next year or so, while irreparable damage is being done to the entire value chain.
The Coalition for American Solar Manufacturing (CASM), is promoting recent analyses by Hari Chandra Polavarapu, managing director of solar and clean-technology research for brokerage firm Auriga USA.
A solar-focused analyst, Polavarapu contends that China’s alleged actions against foreign domestic industries not only distort markets but also sap the power of competition to drive efficiency and innovation. The practices don’t “help in weeding out inefficient players but poisons the profit pool for everyone.”
Global competitors are expected to compete with state-sponsored entities without any of the advantages that entails, he said.
“The crux of the issue is about rules of engagement on solar PV trade/policy given sovereign intervention from China, and when practiced in extreme form as seen with solar PV industry, it has led to structural imbalances within an industry with ramifications far more than just cheap prices. Individual industries and companies can compete against each other but cannot compete against a sovereign which has currency, capital, taxation, and policy levers at its disposal,” he said.
“We believe the China dynamic is key to solar PV industry outlook for 2012 and beyond - if Chinese downstream solar installations are encouraged by policy in a meaningful way then it will be a major positive for the industry/companies as it will correct the supply side imbalance. On the other hand, if supply side support for local solar PV companies continues unabated, and should the U.S. policy (and possibly other countries) response be an imposition of import tariffs or local content requirements, the drag on the industry will continue with negative implications for stocks.”
Polavarapu said the industry would eventually adjusted to the new dynamics –its response to reduced subsidies is an example of how.
CASM – founded by seven domestic crystalline silicon solar technology producers led by SolarWorld, the largest U.S. producer for more than 35 years – filed anti-dumping and anti-subsidy trade petitions in October 2011 against Chinese solar manufacturers to halt what the petitions characterize as pervasive, systemic use of state support to injure the U.S. industry.
On Dec. 2, the U.S. International Trade Commission unanimously issued a preliminary ruling that Chinese trade practices are harming the U.S. domestic solar industry. The next step will be Commerce’s preliminary determination on whether to impose import duties to offset the effects of allegedly illegal Chinese subsidies.
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