Yesterday, January 22, 2018, U.S. Trade Representative (USTR) Robert Lighthizer announced the imposition of safeguard tariffs on solar cells and modules. Much has been said in the general press about this case, but only now is the key point starting to register, and is something international traders immediately thought about – is President Trump starting a new trade war with China?
By way of a quick summary, after seeking relief through the antidumping and countervailing duty laws and not getting the desired market relief, Suniva, later joined by SolarWorld, invoked Section 201 of the Trade Act of 1974. The appropriate petition was brought, the International Trade Commission (ITC) conducted the required proceedings, found detrimental harm, and made recommendations to the President. While disagreement among the Commissioners was acknowledged, most favored an increase in duties, and President Trump agreed. Safeguard tariffs have been imposed for four years – the maximum length of time permitted – on a per year basis – 30%, 25%, 20% and 15%. The USTR announcement also states the first 2.5 gigawatts of imported cells are excluded from the safeguard tariff. A critical point here is these safeguards are being imposed on both the cells and the modules, regardless of where made, as would be expected from a global safeguard, but the solar cells are overwhelmingly made in China.
As part of the Fact Sheet announcement, there is a brief summary of the major findings underpinning the ITC’s decision. One need only consider that recitation to understand the focus of this case is China. At the same time, we should not lose sight of the fact Mr. Lighthizer simultaneously announced tariff rate quotas to be imposed on residential washing machines in a 201 proceeding initiated by Whirlpool. There, the actions of two Korean competitors were complained about which were previously the subject of an antidumping case. For this commodity, the tariff-rate quota is imposed for only three years:
While the domestic industry dynamics surrounding these distinct commodities is quite different, there are murmurings in the general press about how the imposition of these safeguards is really intended to influence China’s behavior. Of course, the 232 proceedings dealing with steel and aluminum are also making their way through the process, with those decisions by the White House expected in April. As we go to press, the ITC’s recommendations regarding the steel case are confirmed as referred to the White House, whereas the same public confirmation remains pending for the aluminum case.
What international traders quickly realized about these 201 cases is:
1) There is a provision in the World Trade Organization (WTO) accession agreements all members sign which permits countries to take what would otherwise be improper action against imports in cases where national security interests apply. Is such an exemption only applicable to the 232 cases? If so, does that mean the solar cell/module and/or the residential washing machine case(s) might be subject to dispute resolution proceedings before the WTO? If so, how long will those cases take to be concluded, especially given the turmoil surrounding U.S. actions and WTO Appellate Body appointments?
2) The fact the solar cell/module and washing machine safeguards were announced in the same Fact Sheet may provide a means for the Administration to argue its actions do not constitute retaliation against China as Korea is impacted by the second case, but will similar surroundings be available when the 232 decisions are announced?
When all is said and done, the key question for the world may well be how much is this the Administration’s unique way of trying to get China to engage in a specific manner regarding North Korea? In the meantime, we international traders know to ask: how long will it take for China to retaliate and what goods or services will be most impacted?