Solar panels are back in the headlines, this time because of perceived unfair competition by the Chinese.
A decision earlier this month by the European Commission (EC) could see import duties of around 47% placed on photo-voltaic (solar) panels from China, in a move to guard against what the commission sees as the dumping of cheap goods in Europe.
The measure, which would be implemented provisionally from June 6, comes after Chinese solar panel production quadrupled between 2009 and 2011.
With a potential trade spat in the offing, it’s useful to look at recent trends in the US to see that trade figures can be nuanced.
A study of recent US trade data by American environmental think-tank PEW showed that current trade flows reflect the reality that China is a low-cost producer and the United States a high-volume consumer of finished products.
But underlying these truths is a trading relationship that is more nuanced, in which the US has key strengths that often go unrecognised.
Firms based in the two nations traded more than £4.3billion worth of solar products and services in 2011, with finished solar modules accounting for 95% of the solar products exported by China to the Americans. China also exports £99million worth of solar cells to the US.
Both of these products reflect China’s strengths in mass assembly and high-volume manufacturing.
The US, however, in this sector showed a competitive advantage in producing high-value inputs, such as polysilicon and wafers, materials used in making photovoltaic modules and the capital equipment and systems necessary in solar factories.
All told, firms based in the US traded more than £2.4billion worth of goods and services with Chinese interests in the solar photovoltaic sub-sector, while Chinese companies exported £1.8billion worth of products in the opposite direction.
On a net basis, the US enjoyed a £600million surplus in the solar sector.
European producers say Chinese companies have captured more than 80% of the EU market already from almost zero a few years ago, with panel exports worth about £18billion (21billion euros) to the Union in 2011.
Europeans, however, still lag behind their American cousins in terms of value-added solar manufacturing.
Despite the US being in trade surplus in solar products and services, it also levied its own duties on Chinese solar energy products last year, arguing that China’s rapid expansion into the industry had created a massive oversupply.
Until now, policymakers in China have used a model that uses subsidies to create a world-leading “green tech” industry.
The manufacturing of silicon-based solar modules indeed became a commodity business, producing large volumes and, at best, tiny profit margins.
Last month, Chinese firm Suntech, which in 2011 was the world’s biggest seller of silicon-based photovoltaic modules and was once valued at $13billion on the New York Stock Exchange, was declared bankrupt.
With falling demand in an economically stagnant Europe, its 2012 revenues plunged 48% on the previous year, with the firm defaulting on $541million worth of debt.
The move on duties by the EC has prompted a cautious response from Beijing, which is calling for further dialogue.
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