US Taxing of Chinese Enterprises is Despicable

On March 21, the U.S. Department of Commerce announced its preliminary ruling in the case on illegal subsidies for Chinese photovoltaic products. Besides taxing the companies Suntech and Trina Solar 2.9 percent and 4.73 percent respectively for illegal subsidies, it also levied a 3.61 percent duty on all other relevant Chinese enterprises. Despite the fact that the levied tax is not high, the nature of the tax is despicable, its aim carefully disguised.

The case on photovoltaic products went on for half a year as the preliminary determination was repeatedly delayed, betraying the complexity of the case.

First, the investigations were strongly opposed by Chinese enterprises. Chinese photovoltaic firms actively organized to counter the suit, using copious evidence to prove that development in Chinese photovoltaic products has been forged in a fiercely competitive market. Companies have not directly enjoyed any government subsidies, and furthermore, several of the firms involved are U.S.-listed companies with transparent operational channels and financial management, leaving nothing to nitpick over.

Second, at the same time, the case has also met with opposition from the U.S. energy industry. The Solar Energy Industries Association has publicly opposed the case, indicating that the decision was a mistake with regards to U.S. interests. Although the case protects the interests of a minority of solar panel makers, it severely harms the development of the new energy industry in America. As soon as the U.S. applies high penalizing duties, most downstream American companies will face rising production costs and operational difficulties, possibly leading to further unemployment.

Third, the case does not only affect the new energy industry in both the U.S. and China, but also complicates the development of the new energy industry across the globe. Since the financial crisis, the principal developed nations have all categorized the development of new energy industries as a key objective and have thrown their support behind it. As we all know, the missing element in the recovery of the global economy is the emergence of new products and the process of industrialization. If this ruling on the case is maintained, U.S. and European policies on new energy will face adjustments and the elimination of appropriations for supporting projects. This will undoubtedly cast a new shadow on the global economy’s recovery.

The details of the case are clear, and U.S. policymakers will not ignore all of these factors. This is also why the case was delayed for so long, and why in the end the U.S. was forced to recognize its mistake.

Apart from the aforementioned factors, the case is closely linked to the U.S. elections and changes in Obama’s popularity and levels of support. To say that the case is protectionism is but a conventional explanation. In reality, the case’s political objective is extremely obvious: it is a bid for industry support by putting pressure on China. However, this type of stratagem is born of too much concern for winning political points and neglects the interests of the U.S. economy as a whole. Alternately, it can be said that these types of methods expose American politicians’ shortsighted behavior, ignoring long-term interests and thereby becoming unpopular. In trying to make the best of its mistake by issuing this forced preliminary ruling, the U.S. ruling will undoubtedly have dire consequences long into the future.

Huo Jianguo is president of the Chinese Academy of International Trade and Economic Cooperation