U.S. Solar Panel Makers Accuse Chinese of Trade Violations

Seven American solar panel makers filed a broad trade case in Washington against the Chinese solar panel industry on Wednesday, accusing it of using billions of dollars in government subsidies to help gain sales in the American market. The companies also accused China of “dumping” solar panels in the United States for less than it costs to manufacture and ship them.

The trade case, filed at the Commerce Department, seeks tariffs of more than 100 percent of the wholesale import price of solar panels from China. Imports of Chinese solar panels to the United States totaled $1.6 billion in the first eight months of this year.

The filing, which the Commerce Department has no choice but to review, under federal rules, comes as anti-China sentiments are running high in some Washington corridors.

The Senate recently passed a bill that would require the Treasury Department to order the Commerce Department to impose tough tariffs on certain Chinese goods, if Treasury found that China was improperly valuing its currency to gain an economic advantage. So far, Republicans have declined to bring the House version up for a vote.

Chinese commerce officials had no immediate comment about the solar panel filing, but have long vehemently opposed such trade cases. The matter will probably be controversial within the United States, too. For one thing, if successful it would drive up the cost of solar energy in the name of keeping the American industry competitive.

The case also coincides with criticism by Congressional Republicans of the Obama administration’s efforts to support American clean energy companies. Republicans argue that federal loan guarantees of more than a half-billion dollars to the now-bankrupt solar company Solyndra show the folly of the administration’s trying to guide industrial policy in clean energy.

But two Democratic senators on Wednesday supported the trade case. “American solar operations should be rapidly expanding to keep pace with the skyrocketing demand for these products,” said Senator Ron Wyden of Oregon, who appeared at a Washington news conference on the case held by an Oregon solar panel maker, Solar World Industries America.

“But that is not what has been happening,” Mr. Wyden said. “There seems to be one primary explanation for this; that is, that China is cheating.” He was joined by his Oregon colleague Senator Jeff Merkley, who said China was engaging in “rogue practices.”

Whatever the partisan positioning, though, the trade case would procedurally begin above the political fray. It will follow a quasi-judicial path at the Commerce Department and a related American agency, the International Trade Commission, that is designed to operate without political partisanship influence. Congress created the apolitical process for trade cases during the cold war, because of a perception that Democratic and Republican administrations had tolerated subsidies and dumping by many countries as long as they were American allies against the Soviet Union.

Other recent industry cases against China that have followed this process include one filed in late March, involving galvanized steel wire. The most recently completed tariff case against China, in late May, resulted in tariffs of about 33 percent levied against certain types of imported aluminum products.

A Chinese solar company manager, speaking on condition of anonymity, said in a telephone interview that in any trade case filed by the American industry, “we would be well prepared and are confident we could defend it.”

President Obama recently appeared to support the domestic solar industry’s concerns, in a White House news conference on Oct. 6: “Even if the technology was developed in the United States, they end up going to China because the Chinese government will say, ‘We’re going to help you get started, we’ll help you scale up, we’ll give you low-interest loans or no-interest loans, we will give siting, we will do whatever it takes for you to get started here.’ ”

United States policy toward China has also emerged as an issue in the presidential campaign, provoking an early back-and-forth between the Obama team and Mitt Romney, whom many Democrats expect to be the Republican nominee. Mr. Romney, talking tough in a Republican debate last week, said the United States had been “run over by China” for 20 years and “you have to have a president that will take action.”

In response, Mr. Obama’s senior strategist, David Axelrod, countered that Mr. Romney once again was flip-flopping, having criticized Mr. Obama in the past as “protectionist” for mounting a trade case against China on behalf of American tire producers.

Wednesday’s filing is a sweeping effort by the hard-pressed United States renewable energy industry to use trade laws to slow or reverse the rapid rise of Chinese companies in the American market.

But it may yet prove too late to save the American industry. China already accounts for three-fifths of the world’s solar panel production, giving it enormous economies of scale even as American companies have been closing factories and laying off thousands of workers this year.

China holds a similar share of the world’s wind turbine market, and Chinese wind energy companies are preparing for a big push into the American market as well.

In the case of solar equipment, China exports 95 percent of its production, much of it to the United States, which has helped push wholesale solar panel prices down from $3.30 a watt of capacity in 2008 to $1.80 by last January and now to $1.20. A typical solar panel might have a capacity of 230 watts.

The trade case seeks tariffs “well in excess of 100 percent” on the wholesale price of Chinese solar panels on arrival at American docks, as punishment for “dumping” goods. The filing also requests additional tariffs to offset the benefits from subsidies, but does not propose a percentage.

Including installation, the American solar power market is worth about $6 billion a year. So far, solar power generates only about one-tenth of 1 percent of the United States’ electricity because it is still more expensive than fossil fuels. Any price increase in the technology, as a result of tariffs, is not likely to improve that ratio.

The wholesale price of panels typically represents half the total cost of a fully installed solar power plant for an electric utility, and about a quarter of the total cost of a fully installed residential system.

Citing steeply falling prices of solar technology from China, in August alone Solyndra and two other American solar energy companies filed for bankruptcy protection. Those three companies represented one-sixth of United States’ solar manufacturing capacity. Many of the surviving companies, meanwhile, have been laying off workers and closing factories, or setting up shop in China.

Chinese companies supplied the panels for half of the installations completed in the United States in the second quarter of this year, and since then represent an even higher share of new orders and shipments, said Shayle Kann, a solar power analyst at GTM Research, a renewable energy market research firm in Boston.

Solar World Industries America, the largest maker of conventional solar panels in the United States, made the decision in late spring to assemble a coalition for a case against China, even before Solyndra’s difficulties became widely known, according to Gordon Brinser, Solar World’s president.

Significantly, the other six companies that joined the case have withheld their names, as they are entitled to do under Commerce Department rules. Masking the identities of complainants allows the companies to avoid accusations of protectionism from critics within the United States. And it has become even more important internationally, as many companies fear that the Chinese government is ready to retaliate against any business that challenges its policies.

Solar World Industries America, based in Hillsboro, Ore., is actually a subsidiary of Solar World, a German company. The American subsidiaries of foreign companies are allowed to file antidumping and antisubsidy cases if they produce in the United States. Solyndra is not taking part because it does not manufacture the traditional kind of panels, so-called blue solar panels, covered by the case.

“This had nothing to do with any input from either side of the aisle” in Congress, nor was it influenced by the Obama administration, Mr. Brinser added. Indeed, Solar World might have acted sooner, he said, except that the Obama administration announced a year ago that it would investigate whether China’s clean energy policies violated international trade rules. But so far the administration has taken no action on solar power beyond alerting the World Trade Organization to Chinese subsidies.

When the administration started that investigation, “we hoped something would come out of it,” Mr. Brinser said.

Solar World said it was representing a newly formed trade association, the Coalition for American Solar Manufacturing.

An existing trade group, Solar Energy Industries Association, is deeply split over trade actions against China, because it includes American subsidiaries of Chinese solar manufacturers and American companies that sell raw materials and factory equipment to Chinese solar panel makers. Thomas P. Kimbis, vice president for strategy and external affairs at the Solar Energy Industries Association, said in an e-mail on Tuesday evening that his group would not side with any party in antidumping or antisubsidy cases.

The trade case filed Wednesday contends that China has helped its solar panel industry by providing the equivalent of billions of dollars in subsidies in the form of deeply discounted loans, land, electricity, water and raw materials, as well as cash grants and tax breaks.

Many American companies also receive subsidies from federal, state and local programs — as in the instance of Solyndra’s $528 million in federal loan guarantees. And Mr. Brinser said that Solar World was in the process of obtaining $4 million in research assistance from the federal government. An Energy Department report in July said that American federal subsidies for solar power totaled $1.134 billion in the 2010 fiscal year, up from $179 million in 2009.

But because few American companies export 95 percent of their production, they are less likely to run afoul of trade rules against export subsidies.

And yet, W.T.O. rules also prohibit domestic subsidies that discriminate against imports. While these rules are more lenient than the strictures against export subsidies, China could potentially still file a complaint to the W.T.O. about the American subsidies.

The Obama administration in May notified the W.T.O. of 46 Chinese policies that the United States labeled as clean energy subsidies, along with dozens of broader subsidy programs not limited to green energy for which Chinese solar power companies could also qualify. China has already repealed many of these policies after the United States complained about them over the last couple years.

But under Commerce Department rules, companies in the United States may seek punitive tariffs on imports that continue to benefit from past subsidies by foreign governments, like Chinese subsidies that were given to improve brand recognition around the world and then later repealed after the companies became established overseas.