U.S. and European Duties on Solar Panels from China

International Trade: U.S. and European Duties on Solar Panels from China

Beginning in 2009, the value of imports of solar panels from China to the United States grew from $640 million to over $3 billion. During the same time period, American solar panel firms had gone bankrupt. In October 2011, several U.S. companies selling solar panels filed a trade complaint against Chinese firms, arguing that these foreign firms were dumping panels and that they were being subsidized. A ruling by the Department of Commerce (DOC) in October 2012 stated that Suntech Power Holdings Co., Ltd. sold solar panels at 32% below costs and that another producer from China was selling them at 16% below costs. By definition, this is considered dumping in the United States and Europe. DOC recommended that tariffs of 32% be implemented against Suntech and 24% against the second company. Use the graph (that shows trends in installation and price of solar panel) below as a reference to answer the following questions.

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  1. What were the effects of the alleged dumping in the US market on consumers and producers? Explain
  2. What were the effects of the antidumping duties (i.e. tariffs of 32% on Suntech and 24% on the second company) on consumers, producers, and the government? Explain
  3. What was the expected net welfare effect of dumping (before antidumping duties) in the US?
  4. What was the expected net welfare effect of antidumping duties in the US?
  5. Was the imposition of the antidumping duty by the US government the right decision? Explain why.

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