I don’t usually post about anti-dumping cases, especially ones with high-profile coverage from mainstream press – like the case about solar panels from China. My assumption about an anti-dumping case, until proven otherwise, is that it is raised by companies desperate to find somebody else to blame for their own failures. That said, sometimes the dumping is real, but we don’t know that yet in the solar panel case against Chinese companies.
What does get me excited are authors who pose as experts, but clearly don’t know what they are talking about. That happened Monday in an article in the South China Morning Post about the solar panel case. Anything published by the SCMP can be important because it is often the most reliable source of China news and sometimes helps shape opinion in China itself. The on-line edition offers no way to comment on an article, so I can’t resist making a few points here.
The article is “China’s solar panel manufacturers are not out to undercut US competition” by John Gong, an associate professor at the University of International Business & Economics in Beijing, apparently an important source of training for Chinese officials. Not sure what Professor Gong’s field is, but it can’t be anti-dumping law. He argues that (1) Chinese companies offer low prices because of intense competition within China, and (2) the Chinese companies don’t mean to hurt the U.S. companies. The first is irrelevant to an anti-dumping case – and the second is absurd. If the Chinese don’t mean to compete, why are they competing? But Professor Gong appears to think that the intentions of the accused parties should be a prime focus of an anti-dumping case, a basic misunderstanding of what it is all about.
An anti-dumping investigation does not look at intentions, or whether pricing practices are “fair”. It looks solely at whether or not the goods are being sold in a foreign market at a price below the price that prevails in the manufacturer’s domestic market. [Determining those prices is an extraordinarily complicated business - hence the need for an investigation.] If the price in the importing country is proven to be lower than the domestic price in the exporting country, then it is dumping, and anti-dumping duties are then computed to offset the price difference (the “margin of dumping”). Nothing at all is said about why the two prices might differ. Why the price of solar panels might be low in China doesn’t matter. And, if indeed the price in China is low, that makes it less likely that Washington will find that dumping is taking place. So Professor Gong should hope that Chinese prices are very low.
Speaking of “fairness”, Professor Gong compounds his error:
The price decline is also partly driven by the tremendous excess capacity in China, which has mostly resulted from local governments’ overzealous policies to attract investment. The provision of cheap or even free land, inexpensive infrastructure, subsidised public utilities and favourable tax regimes were common during the boom in the solar industry a few years ago.
None of this is considered in an anti-dumping investigation – but they would be examined in a countervailing duty case. You don’t want to go there, Professor Gong.