China's photovoltaic cell industry will take a heavy blow if the European Union imposes punitive tariffs on imports of Chinese solar panels. And while such tariffs may benefit a small group of domestic players in Europe, they will have an adverse effect on the crisis-hit European economy and global efforts to reduce greenhouse gas emissions.

In May, the United States decided to impose preliminary anti-dumping duties of up to 250 percent on imports of Chinese solar cell products. The EU will decide next month whether to follow the US' lead. If the EU does follow suit, the Chinese makers of solar panels will be squeezed between increased export costs and dwindling markets.

The US and EU regulators, pressured by their local industries, are resorting to trade remedy measures to thwart imports from China, a major player in the global photovoltaic cell industry, despite the fact that past anti-dumping cases show they are the least constructive way to solve such disputes.

The most telling example is the tire dispute between China and the US. In September 2009, the US imposed heavy "safeguard" tariffs on imports of Chinese tires on the grounds that Chinese tire-makers dumped their products in the US market. These tariffs have caused huge losses for Chinese firms, while US consumers have had to pay higher prices for their tires. According to the Peterson Institute for International Economics, the additional cost could have totaled more than $1 billion in 2011.

In a similar vein, the US imposition of anti-dumping duties on Chinese solar panel products will backfire. Although it will benefit upstream domestic panel producers, the downstream installation sector will suffer from lost jobs, which is why the decision has been challenged by many people in the US.

If we take into consideration the fact that the US exports hundreds of millions of dollars worth of polysilicon products to China each year, the US could lose more jobs if China reciprocates.

Perhaps encouraged by the US action, some enterprises in the EU have demanded similar China-targeted investigation and punishment. But the EU should avoid repeating the US' blunder.

Of course, if the EU decides to impose extra tariffs on Chinese products, the Chinese industry will receive a much heavier blow. The EU market accounts for more than half of its exports. However, they would also damage the EU's clean energy endeavors, as costs would surge.

More importantly, the global effort to minimize greenhouse gas emissions would suffer serious setbacks.

Related

• MOC: U.S. ruling on solar cells signals protectionism
• Duties on China solar cells would cause US job losses

Go to Forum >>0 Comment(s)