Solar Panel, Wind Turbine Tariffs Reveal Conflict Between Trade, Climate Policy
Although utilities that are installing wind and solar operations and wind turbine manufacturers would like antidumping duty and countervailing duty laws to change to take public interest into account, panelists at Georgetown Law's International Trade Update acknowledged it will probably never happen.
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Vanessa Sciarra, vice president for trade for the American Clean Power Association, said, "That’s going to be a hard thing to change for political reasons," and because it would be difficult to integrate the change into the regime. However, she said there are several members of Congress who have made proposals to allow the Commerce Department to weigh the broader public interest as it considers AD/CVD petitions.
Sciarra was speaking on a panel May 24 on the tension between trade and climate change policy. Her fellow panelist, Bill Reinsch, called himself a trade remedies purist, and said he thinks adding a public interest plank is a terrible idea. "Congress structured the system to favor the petitioner. They wanted the petitioner to be able to win," Reinsch said. He said that what legislators "wanted was a very low bar to filing. So, somebody had a grievance, they would come in, and someone in the government would be predisposed to look at it. And I don't think that's going to change."
"They may try to squeeze it into the Competes Act," he said, referring to proponents for adding discretion on whether raising AD/CVD for a firm is contrary to a broader goal. "I would be surprised if the conferees would buy it because it’s new, it’s untested," he said. He noted that opponents to Level the Playing Field Act 2.0 -- a proposal that is in Competes but not in the Senate version of the China package -- are already saying that it is untested and too new.
Sciarra complained that Commerce Secretary Gina Raimondo is looking too narrowly at the anti-circumvention inquiry and that she has more discretion than she thinks to intervene. But Reinsch reminded her that the administration already had the opportunity to make imported solar panels cheaper when it was time to reevaluate the solar safeguards, and the president chose to mostly keep the tariffs in place.
Reinsch predicted a split decision in the case but didn't want to express an opinion on the merits of the anti-circumvention petition, which, if Auxin Solar wins, could increase the prices of panels made in Southeast Asia (see 2204050052). Past research shows that no matter the product, imports decline while the Commerce Department is investigating, and once the preliminary determination is out, whether the duties are 3% or 200%, imports start to rebound, he said.
"We’re in the panic phase right now. There’s a lot of hyperventilating going on both sides," he said.
While the anti-circumvention investigation is the most salient example of the conflict between advancing climate goals and protecting domestic industry, panelist Andrew Quinn, director of trade policy at General Electric, said that a series of antidumping cases have been landmines for his firm, and that the Section 301 tariffs on wind turbine inputs have been significantly harmful. There are 25% tariffs on bearing housings, generator components, high tech magnets, drives and motors used inside wind turbines. According to Wind Power Monthly, the China tariffs increase the cost of installing turbines in the U.S. by 20%.
Quinn said that he has had to brief the CEO before earnings calls about how these tariffs are driving down margins in the renewables segment at GE, and that there is nothing to do for it except to lobby the president.
"I think frankly there was a desire to hide the cost of these tariffs by hiding it in industrial goods," he said. "It was put on the manufacturers to sort of suck it up, and find some way to balance this." Quinn said he's afraid that the tariffs are going to be lifted on consumer goods first, and the goods that are part of China's desire to dominate new technologies will come off last. " We’ll get to List 1 exclusions after my grandchildren are dead," he said. And, as a result, he said, wind installations are going down.
Sciarra said the Section 301 tariffs affect domestic solar manufacturing, too -- for instance, the only maker of solar-panel-making machines is in China, and those machines are subject to a 25% tariff. She said that as long as those are in place, factories in the U.S. won't expand.
She said that if all importers were allowed to apply for exclusions again, as was envisioned in the Senate's trade title, it would be a way to "release some steam" and that manufacturers would feel they could get a fair shake, as they would trust this administration would have a transparent process, and that it would follow its enumerated criteria, such as the hit to jobs from the tariff, or the fact that you tried and failed to find the product from another country. "But having no process seems fundamentally unfair," she said.
Reinsch argued that removing any China tariffs, even if it would be better for the economy, is too politically hazardous for President Joe Biden, because China would only remove its own retaliatory tariffs, not make any concessions he could say justified the rollback.
Quinn argued that an exclusion is not the same as a tariff removal, and is not a change in policy toward China. "These are very discrete," he said, and aimed at mitigating the damage to U.S. companies.