shining a light on u.s.-china clean energy cooperation
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1 Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
Shining a Light on U.S.-China
Clean Energy CooperationNew Approaches Needed to Ensure Chinas Global
Technology Ambitions Do Not Erode U.S. Clean
Energy Competitiveness
Melanie Hart February 2012
Introduction
Te U.S. Deparmen o Commerce nex monh is expeced o issue a criical ruling on
one o he bigges rade cases o hi he U.S.-China energy relaionship in recen years.
Seven U.S. solar companies claim ha he Chinese governmen unairly subsidizes
Chinese solar panel manuacurers o enable hose companies o sell heir producs a
below-marke prices and drive U.S. compeiors ou o he marke. Te seven companies
suppor subsidy and dumping peiions led by SolarWorld Indusries America Inc.
agains Chinese solar impors in Ocober ha ask he Commerce Deparmen o levy
riple-digi aris on solar cells and modules impored rom China.
Tis case highlighs a major challenge acing U.S.-China clean energy relaionships more
broadly: how o handle he Chinese governmens deploymen o massive resources
oward developing renewable energy echnologies, many o which are designed or
expor. Indeed, his is an issue ha bedevils U.S.-China rade relaions no jus in clean
energy, bu also in oher indusrial and services secors, which means ha how his com-
plain by U.S. solar manuacurers plays ou may well have much broader implicaions.
One o he bigges challenges acing renewable energy in he Unied Saes is ha radi-
ional ossil uels are cheaper here han hey are in almos any oher developed counry.
Tis is primarily due o he large supply o ossil uels such as coal and naural gas in our
naion, as well as a long hisory o ederal governmen subsidies or developing hose
energy sources. Te Unied Saes has also ailed o pu a carbon price on ossil uels, so
U.S. ossil-uel prices do no include he environmenal and public-healh damage rom
greenhouse-gas polluion. Relaively low ossil-uel prices make i paricularly hard or
renewable energy o compee agains convenional energy in he U.S. marke.
http://www.rechargenews.com/energy/solar/article300471.ece?WT.mc_id=rechargenews_rsshttp://www.americansolarmanufacturing.org/fact-sheet/http://www.americanprogress.org/issues/2011/08/china_energy_competitiveness.htmlhttp://www.ustr.gov/webfm_send/3189http://www.americanprogress.org/issues/2010/07/big_oil_spigot.htmlhttp://www.americanprogress.org/issues/2010/07/big_oil_spigot.htmlhttp://www.ustr.gov/webfm_send/3189http://www.americanprogress.org/issues/2011/08/china_energy_competitiveness.htmlhttp://www.americansolarmanufacturing.org/fact-sheet/http://www.rechargenews.com/energy/solar/article300471.ece?WT.mc_id=rechargenews_rss -
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2 Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
Noneheless, over he pas decade U.S. companies have goten much beter a manuac-
uring, deploying, and operaing renewable energy echnologies, and as a resul prices
are coming down rapidly. As prices decrease renewable energy gains marke share and
speeds our ransiion oward a more susainable energy economy.
Te problem is China is paricularly good a making hings cheaply. A he lower end o
he value chain, ha is primarily due o he counrys low labor coss and massive supplychains. Also advanageous are Chinas lax labor, saey, healh, and environmenal san-
dards. A he higher end, ha is oen because he Chinese governmen provides gener-
ous subsidies and oher orms o suppor or high-echnology research, developmen,
and commercializaion. Low-cos Chinese manuacuring plays a large role in driving
prices down or a wide range o producs, including renewable energy echnologies.
Chinese manuacuring also plays a large role in pricing some U.S. manuacurers ou
o business, wih many o hose manuacurers claiming ha he China price is driven
by Chinese governmen inervenion raher han naural marke orces. I he Chinese
governmen is inervening in a way ha breaks rade rules hen ha ype o rule break-
ing should be remedied in some way.
Deermining wheher China is playing by he rules requires aking a close look a heir
renewable energy policiesno only a he naional level bu also a he provincial and
local levels. Tose policies are oen dicul o parse because Chinas economic sys-
em is no like ha o he Unied Saes. I is a nonmarke economy wih a op-down,
command-and-conrol energy planning process ha is oen nonransparen wih even
more opaque ineracions beween he cenral governmen in Beijing and he provincial
and local governmens when hese policies are implemened. All his makes i very di-
cul o gure ou wheher he counry is abiding by inernaional rade rules.
Te Unied Saes has much o gain rom cooperaing wih China on clean energy. As he
worlds ases- and larges-growing energy marke, China is an ideal esing ground or scal-
ing up and commercializing clean energy echnologies. Combining our wo energy markes
increases economies o scale o bring down coss or consumers in boh counries.
Bu he China we are dealing wih odayis no he same China we were dealing wih 10
years ago. We are accusomed o China ocusing on low-end manuacuring and using
heir cos advanages o make U.S.-designed consumer elecronics and oher low-end
producs cheaper and aser. Now China is moving up he value chain o higher-end
echnology. Tey are aiming o compee wih us in highly engineered, capial-inensive
indusries such as solar phoovolaic, or PV, sysems, where he Unied Saes has long
enjoyed a comparaive advanage.
In shor, insead o serving as he low-cos workshop or U.S. companies, China is aiming
o capure he pars o he produc and services value chain ha we are used o dominaing.
http://www.smartplanet.com/blog/smart-takes/us-states-can-reach-grid-parity-by-2014-energy-experts-say/8551http://www.businessweek.com/magazine/content/04_49/b3911401.htmhttp://www.theatlantic.com/magazine/archive/2007/07/china-makes-the-world-takes/5987/1/http://www.ustr.gov/node/6227http://www.guardian.co.uk/environment/2011/sep/12/how-china-dominates-solar-powerhttp://www.huffingtonpost.com/steven-chu/uschina-clean-energy-coop_b_810709.htmlhttp://www.economist.com/node/21543160http://www.economist.com/node/21543160http://www.huffingtonpost.com/steven-chu/uschina-clean-energy-coop_b_810709.htmlhttp://www.guardian.co.uk/environment/2011/sep/12/how-china-dominates-solar-powerhttp://www.ustr.gov/node/6227http://www.theatlantic.com/magazine/archive/2007/07/china-makes-the-world-takes/5987/1/http://www.businessweek.com/magazine/content/04_49/b3911401.htmhttp://www.smartplanet.com/blog/smart-takes/us-states-can-reach-grid-parity-by-2014-energy-experts-say/8551 -
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Te Unied Saes should no shrink rom ha challenge. Our rms are generaing he
bes high-end echnologies in he world, and we have a skilledworkorce ha is hard
o bea. A rising China is no a reason or us o close o our clean energy markes and
orei he benes we can ge rom bilaeral rade and oher orms o collaboraion. Tis
relaionship is only a win-win, however, i we compee wih he Chinese on a level play-
ing eld, which is proving o be he bigges challenge.
Ensuring ha he Chinese play by he rules will require more policy coordinaion on
hese ypes o bilaeral rade dispues here in he Unied Saes. Te Obama adminisra-
ions new rade enorcemen iniiaive is a criical sep in ha direcion. Bu i is only a
rs sep. Tis issue brie will give an overview o he curren solar PV rade dispue o
highligh he larger challenges we ace.
Chinas energy economy is a massive command-and-conrol juggernau, and our energy
companies are oen orced o choose beween leting a variey o rade problems slide
versus squaring o agains ha sysem on heir own. Ensuring he U.S. governmen rec-
ognizes and addresses ha imbalance a he ederal level vis--vis China will be criicalor keeping he U.S.-China clean energy parnership moving in a posiive direcion.
Te Unied Saes will also have o do a beter job coordinaing rade enorcemen a
he inernaional level because mulilaeral pressure is increasingly needed o make he
Chinese governmen adhere o global norms and rules. Since Chinas rade policies are
also harming clean energy exporers in many oher counriesparicularly in Europe
he Unied Saes should have pleny o parners o work wih.
The global solar PV market and Chinas manufacturing rise
Te curren rade case ocuses on crysalline silicon phoovolaic cells and modules,
which conver sunligh ino elecrical energy. Te demand or hese PV solar cells and
modules is driven by he demand or solar panel insallaions. Solar echnology has
expanded rapidly in recen years due o he increasing ineres in low-emissions ech-
nology and he declining coss o solar cells. Since i is a newer echnology, however, i
is sill generally more expensive o deploy han naural gas or coal, a leas in he shor
erm. Mos counries already have exensive inrasrucure o suppor coal, bu solar
inrasrucure is sill underdeveloped so solar prices have o include inrasrucure devel-
opmen and capial coss. Due o hose addiional coss, he price dierenial or solar
panels over he pas decade has been driven primarily by governmen subsidies o boos
deploymen o solar energy.
In Europe many o hose subsidies are in he orm o a eed-in ari, which requires
uiliies o purchase solar energy a prices ha are higher han wha he uiliy is pay-
ing or convenional ossil energy. Germany launched he rs major naionwide solar
http://www.americanprogress.org/issues/2012/01/dww_sp_scitechworkforce.htmlhttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://www.iie.com/publications/testimony/subramanian20110921.pdfhttp://www.spiegel.de/international/business/0,1518,784653,00.htmlhttp://www.nrel.gov/learning/re_photovoltaics.htmlhttp://www.americanprogress.org/issues/2011/01/clean_contracts.htmlhttp://www.americanprogress.org/issues/2011/01/clean_contracts.htmlhttp://www.nrel.gov/learning/re_photovoltaics.htmlhttp://www.spiegel.de/international/business/0,1518,784653,00.htmlhttp://www.iie.com/publications/testimony/subramanian20110921.pdfhttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://www.americanprogress.org/issues/2012/01/dww_sp_scitechworkforce.html -
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4 Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
eed-in ari in 2004, and oher European counries ollowed sui. In conras he Unied
Saes has ended o pass renewable elecriciy sandards, which se an overall goal or
uiliies in a cerain sae or ciy o produce a cerain amoun o elecriciy using renew-
able sources. weny-nine U.S. saes
now have hese policies.
Beore 2004 global solar panel demandwas relaively low, and here were no
srong incenives o produce solar
equipmen or expor. Saring in 2004,
however, global demand increased
exponenially, paricularly in Europe,
which caugh he atenion o equip-
men manuacurers worldwide.
Chinese rms in paricular saw a new
expor opporuniy and sared manu-
acuring solar panels or Europe andoher overseas markes.
Chinese manuacurers enered he
global marke in 2004. By 2007 China
had become he worlds larges solar cell
producion counry. By 2008 hey were
he larges solar panel producer in he world. By 2010 hey conrolled almos halo he
global marke, up rom jus 15 percen in 2006. (see Figure 1)
As hey have in many oher secors, Chinese enerprises ook over he global solarmanuacuring marke by compeing on price.
U.S. trade allegations and Chinas response
Te China price is he ocus o he curren rade case. Te solar PV peiion claims
ha he Chinese governmen unairly subsidizes Chinese solar panel manuacurers by
providing land, elecriciy, maerial inpus, and nancing a below-marke raes, as well
as direc nancial suppor and oher preerenial policies. Te peiion says hose subsi-
dies are designed o aricially suppress Chinese manuacuring coss and drive oreign
compeiors ou o he marke.
China cerainly has a hos opolicies designed o spur indigenous innovaion across a
wide range o clean energy echnologies including solar.1 A he naional level Chinese
leaders dene clean energy as heir hisoric opporuniy o nally gain a dominan
marke posiion in a criical echnology secor. Green energy is one o seven sraegic
FIGURE 1
Chinas swift solar PV market dominance
Annual solar module production growth and China market share, 2000-2010
25,000
20,000
15,000
10,000
5,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
0
10
80
60
40
20
90
70
50
30
10
0%
Solar megawatts Market sh
Total global PV production
Total Chinal PV production
China global PV market share
Source: Earth Policy Institute
http://www.ucsusa.org/clean_energy/solutions/renewable_energy_solutions/renewable-electricity-1.htmlhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.businessweek.com/magazine/content/04_49/b3911401.htmhttp://www.solarworld-usa.com/news-and-resources/news/domestic-solar-manufacturers-petition-to-stop-unfair-trade-by-china.aspxhttp://www.gov.cn/jrzg/2006-02/09/content_183787.htmhttp://www.amcham-shanghai.org/amchamportal/InfoVault_Library/2010/What's_Next_in_China%E2%80%99s_Indigenous_Innovation_Program.pdfhttp://www.americanprogress.org/issues/2011/08/china_energy_competitiveness.htmlhttp://english.peopledaily.com.cn/90001/90778/90862/7170816.htmlhttp://www.earth-policy.org/indicators/C47http://www.earth-policy.org/indicators/C47http://english.peopledaily.com.cn/90001/90778/90862/7170816.htmlhttp://www.americanprogress.org/issues/2011/08/china_energy_competitiveness.htmlhttp://www.amcham-shanghai.org/amchamportal/InfoVault_Library/2010/What's_Next_in_China%E2%80%99s_Indigenous_Innovation_Program.pdfhttp://www.gov.cn/jrzg/2006-02/09/content_183787.htmhttp://www.solarworld-usa.com/news-and-resources/news/domestic-solar-manufacturers-petition-to-stop-unfair-trade-by-china.aspxhttp://www.businessweek.com/magazine/content/04_49/b3911401.htmhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.epia.org/publications/photovoltaic-publications-global-market-outlook/global-market-outlook-for-photovoltaics-until-2015.htmlhttp://www.ucsusa.org/clean_energy/solutions/renewable_energy_solutions/renewable-electricity-1.html -
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indusries ha Beijing srongly suppors wih sae nancial resources and oher preer-
enial policies such as ax breaks.
Since Beijing prioriizes clean energy developmen, provincial and local governmens
have a srong incenive o develop heir own suppor policies. Some local ocials
simply implemen naional direcives such as he Minisry o Finance direcives
calling on local nancial bureaus o raise and disribue green energy developmenunds. Oher local governmens see clean energy as a prime growh opporuniy and
go well beyond naional policy requiremens in an atemp o urn heir provinces ino
clean energy manuacuring hubs.
Case in poin:Jiangsu Province has paricularly aggressive solar developmen policies.
Jiangsus 2009 hree-year solar PVdevelopmen plan se ambiious arges or solar-
module producion and called on local ocials o culivae name-brand producs
and inernaionally compeiive enerprises by providing sae assisance or produc
developmen and supply-chain vericalizaion.2 Te resul is a province responsible
or wo-hirds o Chinas oal solar PV equipmen producion in 2010more han 90percen o hose producs were expored o overseas markes.3
Subsidy programs are no necessarily anicompeiive. Green energy is an emerging
echnology secor, and policy assisance is oen required o help new echnologies com-
pee wih exising marke alernaivesespecially when he exising alernaives such as
coal already receive explici and implici public subsidies. We have similar green energy
programs here in he Unied Saes.
Wha he U.S. rade peiion claims, however, is ha Chinas subsidies are designed no
jus o suppor inan indusries bu also o undercu compeiors so ha Chinas domes-ic enerprises can ake over a larger share o he global marke. Te solar PV rade pei-
ion claims ha he subsidies provided o Chinese manuacurers are counervailable,
which means hey aricially suppress Chinese manuacuring coss o enable Chinese
companies o sell heir producs a nonmarke prices ha U.S. companies canno mach.
I he Chinese governmen is indeed using subsidies or ha purpose hen i is a marke-
disoring acic ha violaes a hos o rade rulesno only World rade Organizaion
subsidy rules bu also domesic rade legislaion here in he Unied Saes.
Te solar peiions also include allegaions ha China is dumping in he U.S. marke.
Dumping is he pracice o selling goods in he Unied Saes a less han home marke
price or cos o producion. Dumping is also prohibied by he WO agreemens and by
U.S. law, i i resuls in maerial injury o a compeing U.S. indusry.
Te Chinese dispue hose allegaions. When inerviewed or his issue brie in Beijing
recenly, Chinese analyss all claimed Chinas low solar PV prices are due o a combina-
ion o Chinas comparaive advanages in manuacuring and, paricularly over he pas
http://english.peopledaily.com.cn/90001/90778/90862/7170816.htmlhttp://www.renewableenergyworld.com/rea/news/article/2009/03/china-announces-new-solar-incentiveshttp://ditan360.com/NengYuan/Info-98515.htmlhttp://www.chinahightech.com/views_news.asp?Newsid=931383936333http://china.org.cn/business/2011-11/17/content_23938653.htmhttp://china.org.cn/business/2011-11/17/content_23938653.htmhttp://cleantechnica.com/2011/06/20/wind-power-subsidies-dont-compare-to-fossil-fuel-nuclear-subsidies/3/http://cleantechnica.com/2011/06/20/wind-power-subsidies-dont-compare-to-fossil-fuel-nuclear-subsidies/3/http://www.americanprogress.org/issues/2012/01/renewable_energy_investment.htmlhttp://ia.ita.doc.gov/pcp/pcp-overview.html#A_2http://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htmhttp://www.aflcio.org/issues/jobseconomy/globaleconomy/intro301.cfmhttp://www.aflcio.org/issues/jobseconomy/globaleconomy/intro301.cfmhttp://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htmhttp://ia.ita.doc.gov/pcp/pcp-overview.html#A_2http://www.americanprogress.org/issues/2012/01/renewable_energy_investment.htmlhttp://cleantechnica.com/2011/06/20/wind-power-subsidies-dont-compare-to-fossil-fuel-nuclear-subsidies/3/http://cleantechnica.com/2011/06/20/wind-power-subsidies-dont-compare-to-fossil-fuel-nuclear-subsidies/3/http://china.org.cn/business/2011-11/17/content_23938653.htmhttp://china.org.cn/business/2011-11/17/content_23938653.htmhttp://www.chinahightech.com/views_news.asp?Newsid=931383936333http://ditan360.com/NengYuan/Info-98515.htmlhttp://www.renewableenergyworld.com/rea/news/article/2009/03/china-announces-new-solar-incentiveshttp://english.peopledaily.com.cn/90001/90778/90862/7170816.html -
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ew years, excess capaciy and marke-induced
invenory clearing. According o he Chinese
manuacurers, soaring demand growh
beween 2008 and 2010 (see Figure 2 below)
made solar manuacuring look like a golden
opporuniy, and as a resul hundreds o privae
Chinese enerprises dove ino he secorhroughou 2010 and early 2011.
Even Chinese leaher companies dove ino
he marke by opening up solar manuacur-
ing subsidiaries.4 Chinese energy analyss call
hese manuacurers bantu chujia, which
roughly ranslaes o halway monk, or
someone who akes up somehing new wih-
ou commiting o i compleely and wihou
acquiring he necessary experise.5
Ten he pace o global marke growh slowed signicanlyrom almos140 percen
growh in 2010 o around 17 percen in 2011. Chinese rms claim he muliude o
new enrans ooded he marke wih excess capaciy, and Chinese manuacurers were
orced o price solar modules below marke value o clear invenories, hus riggering a
seep price drop ha damaged pros no only in he Unied Saes bu also in China.
Unorunaely, parsing ou how much o he China price is due o marke orces versus
anicompeiive governmen subsidies is exremely dicul. Te reason: Chinas subsidy
programs are oen nonransparen, paricularly a he provincial and local levels. Iis very common, or example, or local ocials o provide land, elecriciy, and oher
resources a below-marke raes o atrac economic developmen (and he associaed
ax revenue) even when he cenral governmen does no suppor hose acics.
Loan subsidizaion is also common. Chinas ier-one manuacurers claim hey are pay-
ing marke ineres raes or heir massive and conroversial China Developmen Bank
loan guaranees, bu some local governmens reporedly reimburse hose companies or
mos o heir ineres paymens, hus reducing he eecive ineres rae o nearly zero
(or, depending on inaion, possibly even below zero). In many cases local governmens
provide hese supporive measures on a case-by-case basis insead o via clear develop-
men policies ha apply o all rms across he board. Tese measures can make Chinas
local level clean energy suppor programs very dicul o measure.
Chinas naional leaders oen sruggle among hemselves o ge an accurae picure o
wha heir local level ocials are doing. Indeed, naional level ocials complain ha
local level economic growh saisics are oen abricaed. When even Beijing has a hard
FIGURE 2
Soaring solar PV demand triggers Chinese market excitement
Annual global solar PV demand growth and forecast, 2008-2014
Source: Solarbuzz
GW demand Percent grow
2008 2009 2010 2011 2012 2013 2014
35
30
25
20
15
10
5
0
160
140
120
100
80%
60%
40%
20%
0%
GW demandPercent growth
http://www.chinanews.com/ny/2011/02-23/2861583.shtmlhttp://www.chinanews.com/ny/2011/02-23/2861583.shtmlhttp://solarbuzz.com/facts-and-figures/market-facts/global-pv-markethttp://www.digitimes.com/Reports/Report.asp?datepublish=2012/01/11&pages=PD&seq=205http://www.hagstromreport.com/news_files/120511_china.htmlhttp://www.businessweek.com/news/2011-11-02/chinese-loans-to-solar-companies-not-subsidized-trina-says.htmlhttp://www.guardian.co.uk/environment/2011/sep/12/how-china-dominates-solar-powerhttp://www.nytimes.com/2010/09/09/business/global/09trade.html?pagewanted=allhttp://blogs.wsj.com/chinarealtime/2011/06/10/chinese-gdp-data-how-reliable/http://58.64.153.139/Registration/2011SNECPPT/131.pdfhttp://58.64.153.139/Registration/2011SNECPPT/131.pdfhttp://blogs.wsj.com/chinarealtime/2011/06/10/chinese-gdp-data-how-reliable/http://www.nytimes.com/2010/09/09/business/global/09trade.html?pagewanted=allhttp://www.guardian.co.uk/environment/2011/sep/12/how-china-dominates-solar-powerhttp://www.businessweek.com/news/2011-11-02/chinese-loans-to-solar-companies-not-subsidized-trina-says.htmlhttp://www.hagstromreport.com/news_files/120511_china.htmlhttp://www.digitimes.com/Reports/Report.asp?datepublish=2012/01/11&pages=PD&seq=205http://solarbuzz.com/facts-and-figures/market-facts/global-pv-markethttp://www.chinanews.com/ny/2011/02-23/2861583.shtmlhttp://www.chinanews.com/ny/2011/02-23/2861583.shtml -
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ime racking local aciviy, i is almos impossible or oreign observers o do so in a
sysemaic ashion, and ha can creae conusion here in he Unied Saes.
The bigger question
How to deal with Chinas ambitious green technology development policies
Te Deparmen o Commerce is invesigaing his solar PV case and will soon
announce wheher hey have ound sucien evidence o levy rade remedies.
Commerce invesigaors are racing he nancial and policy suppor he Chinese
governmen provides o Chinese solar manuacurers, and he U.S. Inernaional rade
Commission will ry o deermine o wha degree ha suppor decreases Chinese manu-
acuring prices and damages U.S. manuacurers.
Te Deparmen o Commerce is expeced o issue a preliminary subsidy deermina-
ion in early March and a preliminary anidumping deerminaion several weeks laer.I he ongoing invesigaions nd Chinese rade violaions, hen ha preliminary
announcemen will likely include a plan o levy aris agains Chinese impors. I is
possible ha once he Chinese governmen realizes aris are imminen hey will ry
o negoiae a setlemenhey may oer o hal he conesed subsidies or ake oher
acion o ge SolarWorld o drop he case.
Ta is how China responded o he Sepember 2010WO complain by he Unied
Seelworkers abou Chinese governmen subsidies o wind equipmen manuacurers.
Some U.S. solar companiesparicularly he companies ha already have purchasing
agreemens wih Chinese solar manuacurersare hoping ha his case will end in anegoiaed setlemen insead o impor aris.
No mater how his paricular dispue ends, however, here is a much bigger underly-
ing issue here ha we mus no overlook. Over he pas hree decades, Chinas role in
he global economy has primarily been as a low-value-added manuacurer. Now he
Chinese wan o move up he value chain o increase pro margins and play a more
dominan role in higher-end global echnology markes. Specically, hey wan o supply
he Unied Saes wih higher-value-added echnologies, paricularly clean energy ech-
nologies. And he Chinese governmen is dedicaing a huge amoun o sae resources o
help heir enerprises achieve ha goal.
Chinas echnology ambiions can be a good hing or he Unied Saes, paricularly
in renewable energy. Our wo counries are he worlds bigges energy consumers, and
open compeiion beween our massive energy markes can uel innovaion, bring
clean energy prices down, and speed boh o our counrys ransiions oward a more
susainable energy economy.
http://www.usitc.gov/trade_remedy/http://www.americansolarmanufacturing.org/news-releases/01-30-12-casm-critical-circumstances.htmhttp://www.ustr.gov/about-us/press-office/press-releases/2011/june/china-ends-wind-power-equipment-subsidies-challengedhttp://www.ustr.gov/about-us/press-office/press-releases/2010/october/united-states-launches-section-301-investigation-chttp://coalition4affordablesolar.org/http://www.chinadailyapac.com/article/innovate-or-slip-down-value-chainhttp://www.huffingtonpost.com/steven-chu/uschina-clean-energy-coop_b_810709.htmlhttp://www.huffingtonpost.com/steven-chu/uschina-clean-energy-coop_b_810709.htmlhttp://www.chinadailyapac.com/article/innovate-or-slip-down-value-chainhttp://coalition4affordablesolar.org/http://www.ustr.gov/about-us/press-office/press-releases/2010/october/united-states-launches-section-301-investigation-chttp://www.ustr.gov/about-us/press-office/press-releases/2011/june/china-ends-wind-power-equipment-subsidies-challengedhttp://www.americansolarmanufacturing.org/news-releases/01-30-12-casm-critical-circumstances.htmhttp://www.usitc.gov/trade_remedy/ -
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Bu heres he rub. China is a nonmarke economy wih a less-han-ransparen energy
planning process. Tis makes i very hard o ideniy when he Chinese cross he line
rom marke compeiion (which we wan o encourage) o anicompeiive behavior
(which we should gh back agains).
We already know ha he Chinese governmen someimes ries o skir rade rules.
When China joined he World rade Organizaion in 2001, he governmen pledgedo submi required repors on specic naional and regional subsidy programs every
wo years, bu i has no abided by ha pledge. Over he pas 10 years i has only
issued wo repors. Te rs, in April 2006, covered some subsidies rom 2001 o
2004, and ha repor was incomplee because i only included naional subsidies no
subnaional programs. Te Chinese governmen submited a second noicaion in
Ocober 2011, bu again did no include subnaional programseven hough China
has clear obligaions o do so.
Because China has no submited hese repors as promised, i makes i more dicul
or U.S. companies o examine Chinese policy programs and deermine wheher heyare rule-abiding or anicompeiive. Furhermore, since governmenransparencyis
a major problem in China across he board, even when U.S. companies are willing o
spend heir own resources o collec ha daa, i is exremely hard o do. Tis gives
China a lo o maneuvering room o enac programs ha erode U.S. compeiiveness.
Clearly he Chinese governmen needs o do more o comply wih hese rade rules,
and he U.S. governmenand he global communiy as a wholeneeds o do more o
enorce ha compliance.
We have wo dispue-resoluion sysems specically designed o handle companycomplains abou apparenly anicompeiive rade praciceshe anidumping and
counervailing duymechanisms here in he Unied Saes and heWO process a
he inernaional level. Bu ling a ormal complain is cosly in boh cases. Some U.S.
manuacurers may no be willing o inves in expensive legal ees, paricularly idue
o he ransparency issuehey hemselves are no cerain wheher he China price is
marke-based or governmen-induced.
For hose companies who are acually doing business direcly wih China, realiaion is
anoher concern. Ocials a U.S. Oce o he rade Represenaive, or USR, re-
quenly complain ha alhough U.S. companies share inormaion abou Chinese rule
breaking privaely, mos are unwilling o le ormal complains because hey suspec
he Chinese will realiae wih puniive marke access reducions. In he curren dis-
pue SolarWorld Indusries America Inc., he domesic uni o he German company
SolarWorld AG, was he only one o he seven solar comapnies willing o sae is sup-
por or he case publicly. Te oher six companies remainedanonymous due o ears
ha China would realiae.
http://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://blogs.wsj.com/chinarealtime/2011/09/28/testing-chinas-government-transparency-sweet-talk/http://ia.ita.doc.gov/intro/index.htmlhttp://www.wto.org/english/tratop_e/dispu_e/dispu_e.htmhttp://www.cnbc.com/id/45712228/USTR_Kirk_Says_Troubled_by_Chinese_Trade_Retaliationhttp://www.nytimes.com/2011/10/20/business/global/six-complainants-in-solar-trade-case-are-unnamed.htmlhttp://www.nytimes.com/2011/10/20/business/global/six-complainants-in-solar-trade-case-are-unnamed.htmlhttp://www.cnbc.com/id/45712228/USTR_Kirk_Says_Troubled_by_Chinese_Trade_Retaliationhttp://www.wto.org/english/tratop_e/dispu_e/dispu_e.htmhttp://ia.ita.doc.gov/intro/index.htmlhttp://blogs.wsj.com/chinarealtime/2011/09/28/testing-chinas-government-transparency-sweet-talk/http://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdf -
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Realiaion can also spread beyond he acual peiioners o harm he U.S. economy
more broadly. In he curren case, or example, rade remedies ha spark Chinese reali-
aion could also harm U.S. companies selling clean echnology inpus o China. Chinese
manuacurers have already argeed upsream solar suppliers by calling on heir own
Commerce Minisry o iniiae an invesigaion ino U.S. subsidies and dumping or
polysilicon expors o China.
China could realiae by blocking marke access as well. In privae conversaions many
U.S.-based polysilicon and solar manuacuring equipmen suppliers say ha in he
curren rade case, realiaory marke access limiaions are a major concern. Many
U.S. solar indusry suppliers ear ha i he Commerce Deparmen levies aris
agains Chinese manuacurers, hen hose manuacurers will immediaely sar buy-
ing upsream producs rom oher counries insead o rom he Unied Saes. Some
Chinese companies are apparenly already insering escape clauses ino heir purchasing
conracs o pave he way or ha swich.
I U.S. companies do ace realiaory measures rom he Chinese, ha would be a rade vio-laion, and hey can cerainly le anoher round o ormal complains. Bu realiaion can
be dicul o prove because i can be dicul o prove why a Chinese cusomer swiched
rom a U.S. supplier o a European one. Whas more, successive rounds o rade dispues
over swiching cusomers would be a massive economic drain on U.S. companies.
Te ip side o realiaion is coercionin he orm o required echnology ranser o
ener he Chinese markeplace and access he counrys cheap labor, is booming domes-
ic marke, and he many governmen subsidy programs ha are available o companies.
echnology ranser is requenly par o global rade deals, bu he Chinese governmen
oen carries i oo ar by blaanly pressuring oreign companies o share propriearyengineering inormaion or he ypes o high-end echnology producs Chinese rms
are sruggling o develop hemselves. Tis can lead o inellecual propery he, which
again harms U.S. companies and erodes U.S. compeiiveness.
o move orward he U.S. governmen will have o do a beter job a dealing wih hese
hreas o U.S. companies operaing in China or exporing here. We need o undersand
and hen ac upon he realiy ha he Chinese economy does no operae like ours. Te
U.S. economy is a decenralized, marke-based sysem wihou op-down economic
planning. Chinese leaders, in conras, run heir economy wih op-down develop-
men plans ha pu a lo o governmen suppor behind criical indusries such as clean
energy. Tose op-down direcives hen measasize a he provincial and local levels
ino myriad programs and policies ha are all bu impossible o discern.
Ta dierence can someimes mean ha when problems arise, individual U.S. compa-
nies and indusries are orced o choose beween leting apparen rule breaking slide ver-
sus squaring o agains Chinas massive adminisraive sae a he naional, provincial,
http://www.bloomberg.com/news/2011-11-21/china-s-solar-industry-seeks-u-s-polysilicon-imports-probe.htmlhttp://www.bis.doc.gov/defenseindustrialbaseprograms/osies/defmarketresearchrpts/techtransfer2prc.htmlhttp://www.nytimes.com/2011/09/06/business/global/gm-aims-the-volt-at-china-but-chinese-want-its-secrets.html?pagewanted=allhttp://www.chinadaily.com.cn/china/2011npc/2011-03/06/content_12122579.htmhttp://www.chinadaily.com.cn/china/2011npc/2011-03/06/content_12122579.htmhttp://www.chinadaily.com.cn/business/2010-10/28/content_11470240.htmhttp://www.chinadaily.com.cn/business/2010-10/28/content_11470240.htmhttp://www.chinadaily.com.cn/china/2011npc/2011-03/06/content_12122579.htmhttp://www.chinadaily.com.cn/china/2011npc/2011-03/06/content_12122579.htmhttp://www.nytimes.com/2011/09/06/business/global/gm-aims-the-volt-at-china-but-chinese-want-its-secrets.html?pagewanted=allhttp://www.bis.doc.gov/defenseindustrialbaseprograms/osies/defmarketresearchrpts/techtransfer2prc.htmlhttp://www.bloomberg.com/news/2011-11-21/china-s-solar-industry-seeks-u-s-polysilicon-imports-probe.html -
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and local level. Boh opions erode U.S. company pros, bu in an era where China is a
global economic powerhouse, many U.S. companies decide ha he rs sraegyaci
accommodaionis likely o resul in he leas damage.
Over ime aci accommodaion can erode U.S. compeiiveness. o avoid ha we need
o nd ways o lower he coss o monioring his bilaeral relaionship o make sure
Chinese enerprises and ocials play by he rules and compee wih U.S. companies onan even playing eld. Doing so will require a shi rom he curren sraegy ha places
our primary enorcemen eors on he backs o individual U.S. companies, some o
whichlike many renewable energy companiesare in emerging indusries ha lack
he poliical leverage o do batle wih he Chinese.
Te bes way o address his problem is o improve rade policy coordinaion a home.
Beijing is very adep a divide-and-conquer acics. In he oreign policy realm,
Chinese leaders are well aware ha i hey can maneuver oher counries o deal wih
hem bilaerally, China will have more negoiaing leverage han i would agains a
unied mulilaeral group. China wans o use he same acics agains U.S. companiesmaneuvering hem o square o one by one agains he massive Chinese sae.
Te U.S. governmen needs o do a beter job making sure ha his approach is no
eecive. In 2010 he USR ook a criical sep in ha direcion wih a year-long
program o monior Chinese governmen suppor or Chinese companies compeing
agains he Unied Saes in clean energy. USR also surveyed Chinas subsidy programs
across he board, uncovering around 200 dieren programs ha violaed WO rules.
USR noied he Chinese governmen o hese alleged violaions and also submited
a lis o Chinese subsidies o he W O. Ta sep does no auomaically rigger a WOinvesigaion, bu i does require China o provide more inormaion abou he USR-
conesed subsidy programs. I also makes he USR ndings available o oher coun-
ries, which can help increase mulilaeral pressure agains his ype o rule breaking. I
he Chinese governmen ails o respond o USR noicaion by providing deailed
inormaion on heir subsidy programs, hen USR may escalae bysubmiting a com-
plain o he WO Subsidies Commitee.
Tese inormaion-gahering and noicaion procedures call inernaional and
domesic poliical atenion o Chinese rule breaking. Tey also lay he groundwork
or he Unied Saes o le addiional rade complains and levy addiional aris
agains Chinese impors, which should give he Chinese governmen sronger incen-
ives o comply wih he r ules.
I is imporan o noe ha he USR subsidy survey did no require specic U.S.
companies o le ormal peiions and ac as inermediaries, a role ha can oen
http://www.koreatimes.co.kr/www/news/opinon/2010/08/137_71235.htmlhttp://www.nytimes.com/2011/10/07/business/us-says-some-chinese-subsidies-violate-trade-rules.html?_r=2http://www.ustr.gov/about-us/press-office/press-releases/2011/october/united-states-details-china-and-india-subsidy-proghttp://ia.ita.doc.gov/esel/files/china-counter-notification.pdfhttp://www.nytimes.com/2011/10/07/business/us-says-some-chinese-subsidies-violate-trade-rules.htmlhttp://www.ustr.gov/about-us/press-office/press-releases/2011/october/united-states-details-china-and-india-subsidy-proghttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://www.ustr.gov/about-us/press-office/press-releases/2011/october/united-states-details-china-and-india-subsidy-proghttp://www.nytimes.com/2011/10/07/business/us-says-some-chinese-subsidies-violate-trade-rules.htmlhttp://ia.ita.doc.gov/esel/files/china-counter-notification.pdfhttp://www.ustr.gov/about-us/press-office/press-releases/2011/october/united-states-details-china-and-india-subsidy-proghttp://www.nytimes.com/2011/10/07/business/us-says-some-chinese-subsidies-violate-trade-rules.html?_r=2http://www.koreatimes.co.kr/www/news/opinon/2010/08/137_71235.html -
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11 Center or American Progress | Shining a Light on U.S.-China Clean Energy Cooperation
urn hem ino sacricial lambs. Insead he Obama adminisraion kicked o
his invesigaion proacively when i launched he Naional Expor Iniiaive in
early 2010. Ta iniiaive ordered USR and he Commerce Deparmen o pay
closer atenion o oreign governmen subsidies ha erode U.S. compeiiveness,
paricularly vis--vis Chinese manuacurers.
Ten here is he new rade Enorcemen Uni announced by Presiden Barack Obamain his recen Sae o he Union speech. Te presiden said he new uni willbring
ogeher key U.S. rade ocials rom he deparmens o he reasury, Commerce,
Energy, and USR (under Michael Froman, depuy naional securiy adviser or
Inernaional Economic Aairs) o beter coordinae U.S. rade acions agains China.
Ta uni will reporedly also consider asking he Commerce Deparmen o iniiae
counervailing duy and anidumping cases isel on behal o U.S. indusries raher han
waiing or companies o le individual peiions.
In heory his approach should go a long way oward balancing he ineress o U.S. com-
panies agains Chinese governmen involvemen in hese dispues, hereby eliminainghe burden on U.S. companies or iniiaing hese acions and reducing he possibiliy
o realiaion by he Chinese agains individual U.S. companies. I his uni also direcs
more ederal governmen ime and resources oward monioring Chinese governmen
behavioragging apparen rade violaions and raising ormal complains wih he
WOhen his approach may also enable he Unied Saes o beter enorce Chinese
compliance wih basic WO rules.
We also need o make sure we are invesing in he oundaions o innovaion here in he
Unied Saes o give our companies he policy environmen hey need o remain com-
peiive agains a rising China. I is ineviable ha here will be some global economicreshufing as China moves up he economic ladder, bu we can gain a lo o benes
rom ha process i handled well. Chinas growing domesic marke, or example, can be
a major new source o consumers or U.S. producs, bu we have o make sure ha we do
no cede criical American jobs o he Chinesein solar manuacuring as in oher U.S.
indusriesjus because we were lax on he policy side.
Conclusion
Chinas ocus on renewable energy and high echnology is here o say. Ta can be a
grea hing or he Unied Saes. Chinese compeiion can give U.S. companies sronger
incenives or innovaion and can help bring down renewable energy prices o beter
compee wih radiional ossil uels. Combining our wo markes can also increase
demand or U.S. clean energy producs and provide exacly he ypes o higher-paying
jobs ha we need o resore our economy o susainable, broad-based economic growh.
http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiativehttp://trade.gov/nei/http://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-addresshttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://www.americanprogress.org/issues/2011/01/china_innovation.htmlhttp://www.booz.com/media/file/China_Consumer_Market_Strategies_2011.pdfhttp://www.booz.com/media/file/China_Consumer_Market_Strategies_2011.pdfhttp://www.americanprogress.org/issues/2011/01/china_innovation.htmlhttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://online.wsj.com/article/SB10001424052970203436904577151273759279432.htmlhttp://www.whitehouse.gov/the-press-office/2012/01/24/remarks-president-state-union-addresshttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://ia.ita.doc.gov/esel/reports/seo2011/seo-annual-report-2011.pdfhttp://trade.gov/nei/http://www.whitehouse.gov/the-press-office/executive-order-national-export-initiative -
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12 C t A i P | Shi i Li ht U S Chi Cl E C ti
Tis relaionship is only a win-win, however, i our companies have a level playing eld,
and more work is needed o achieve ha goal. Te Obama adminisraions new rade
enorcemen iniiaive is a grea sar in he righ direcion. Oher seps may be ideni-
ed once he new rade Enorcemen Uni is up and runningseps boh bilaeral and
inernaional in scope ha can help he Unied Saes and China beter manage his crii-
cal bilaeral rade relaionship or he bene o he global economy.
Melanie Hart is a Policy Analyst on China Energy and Climate Policy at the Center for
American Progress.
Acknowledgements
Tanks o Kae Gordon, Ed Paisley, Rudy deLeon, Sabina Dewan, Michael Etlinger, Adam
Hersh, and Sephen Lacey or heir commens on and conribuions o his issue brie.
Endnotes
1 Guo jia zhong chang qi ke xue he ji shu a zhan gui hua gang yao (2006-2020) (Guidelines or the National Medium- and Long-Term Science and Technology Development Program, 2006-2020), PRC State Council, February 2006, available at http://www.gov.cn/jrzg/2006-02/09/content_183787.htm.
2 Jiangsu sheng guang u a dian tui jin yi jian (Jiangsu Province Opinions or Advancing Solar PV Generation), Jiangsu ShengFagaiwei (Jiangsu Provincial Development and Reorm Commission), June 30, 2009, available at http://www.carcu.org/html/zhengceagui/20090702/2974.html.
3 Guang u chan ye zai wai shou zhi yu ren qi neng rang han dong leng le yang guang? (Solar PV Industry Sufering RestraintsAbroad: How to Shine Light on the Cold Winter?),Zhongguo Huanjing Bao (China Environment Report), December 31, 2011, avail-
able at http://ditan360.com/NengYuan/Ino-98515.html.
4 Xu Meng, Guo nei guang u chan ye cheng xian jing pen ren ren zheng gan tai yang neng sheng yan (Domestic Solar PVIndustry Becomes a Gold Rush: Everyone Rushing to Join Solar Energy Feast), Jiefang Ribao (Liberation Daily), February 23, 2011,available at http://w ww.chinanews.com/ny/2011/02-23/2861583.shtml.
5 Ibid.