WTO backs China in 2012 trade case

Judges at the World Trade Organization on Monday ruled that the United States “acted inconsistently” with international trade rules in slapping punitive anti-subsidy and anti-dumping tariffs on Chinese PV cells in 2012.

In its ruling, the three-member WTO panel does not agree with all of China’s complaints about the US investigation and its judgments.

But the WTO concludes that in some instances the US overstepped its legal boundaries, and says the US should “bring its measures into conformity with its obligations” under agreed trade law.

The Coalition for Affordable Solar Energy (CASE), the lobbying group established to oppose SolarWorld's push for tariffs on Chinese cells and modules, quickly trumpeted its support for the decision.

"Today’s WTO announcement and the broader trade dispute should prompt the Obama Administration to reconsider the wisdom of additional solar tariffs," says CASE president Jigar Shah.

Many of CASE's members are downstream solar installers whose businesses benefit from lower-cost modules.

The ruling was nearly two years in the making, with the WTO panel having been established in September 2012, during the course of the first investigation by the US Commerce Department into the trade practices of China's globally dominant PV industry.

The following month - in October 2012 - the Commerce Department finalized a set of anti-dumping duties ranging as high as 239% on Chinese cells, and countervailing duties of up to 16%.

It is not clear what impact, if any, will result from the ruling – which the US may still appeal.

The ruling was originally due in January 2014, and postponed twice.

In the years since the WTO panel was created, many of China’s PV giants deftly shifted to sourcing their cells from Taiwan, allowing them to elude the tariffs.

But critically, a follow-on set of trade cases is currently playing out in the US, with an expanded scope that includes Taiwan.

In June the US issued preliminary countervailing duties in the case, of around 27% for most Chinese producers. A ruling on preliminary anti-dumping tariffs is expected in two weeks, with both sets of duties to be finalized later this year.

Many Chinese suppliers are known to be contemplating a strategy that would see them shifting back to producing all the components at home and simply paying the 2012 duties, rather than transitioning their global supply chains yet again.

If the WTO case had the effect of making it cheaper to employ such a strategy, it would be warmly welcomed by Chinese suppliers – and their US customers.

Most US-listed shares of Chinese PV companies advanced strongly on Monday on the news.