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Export subsidies are illegal under WTO and EU rules

Examples of subsidies granted to Chinese solar industry:

short excerpt of the EU ProSun anti-subsidy complaintView

 

 

Prohibited subsidies are subsidies that require recipients to meet certain export targets, or to use domestic goods instead of imported goods. They are prohibited because they are specifically designed to distort international trade, and are therefore likely to hurt other countries’ trade.

 

The EU anti-subsidy rules define a subsidy as "a financial contribution made by (or on behalf of) a government or public body which confers a benefit to the recipient". The EU may impose countervailing duties to neutralise the benefit of such a subsidy only if it is limited to a specific firm, industry or group of firms or industries. Export subsidies and subsidies contingent on the use of domestic over imported goods are deemed to be specific European Commission DG TRADE website

 

In key fast-growing emerging industries and markets it has identified as strategic, such as solar and wind energy, China employs massive subsidy programs, openly and specifically meant to boost manufacturing and exports. These violate the international trade principles China agreed to when it joined the World Trade Organization (WTO), whose rules focus on remedial actions offended countries can take as opposed to strictly defining what constitutes unfair trade. All of these are contrary to free trade principles. They work together to support a centralized, government-controlled mercantilist economic system that needs to dominate foreign competition both at home and overseas if it is to have a net positive payback Source: Clean Technica 4 May 2012


China readily admits to subsidising its solar manufacturers for exports

China’s solar panel industry has become the world’s biggest thanks to a simple formula: Produce in China, sell in Europe. Benefiting from generous financial backing at home—which the U.S. Department of Energy says amounted to $30 billion in state support in 2010—Chinese manufacturers have spent years boosting capacity. Since the domestic market for buying and installing solar power systems was tiny, the Chinese focused on exports, especially to Germany and other European countries where subsidies helped fuel demand for panels Firing Up China's Solar Market, Bloomberg Businessweek March 15, 2012

 

The plan to fuel China’s export-intensive solar-industry campaign calls for a number of government initiatives, including new policy, financial and price subsidies; more support in industry, financial and tax policy; and further aid with development and production of equipment used to produce polysilicon, silicon ingots, wafers, cells and panels within the crystalline-silicon solar industry. Moreover, the portfolio includes plans to support industrialization of China’s as-yet-undeveloped thin-film industry, specifically harnessing silicon and copper indium gallium diselenide solar technologies Source Wiley Rein Analysis


Chinese government banks subsidise Chinese solar companies with ‘free money’

Bryan Ashley, the Chief Marketing Officer for Suniva doesn't mince words. "The Chinese strategy is very clear. They are engaging in predatory financing and they're trying to drive everybody else out of the market. When you've got free money you can out-dump everybody below cost," Ashley said in an interview with Climate Progress. That "free money" Ashley refers to is the cheap debt provided by the Chinese Development Bank (CDB). Here's how the CDB works its magic. The CDB was originally set up as a "policy bank," to operate as an arm of the Chinese central government, doling out public funding to support central government development programs. Now it is a "joint stock company with limited liability" that often reports to China's national cabinet on certain policy issues. This allows the Chinese government to get involved in CDB activities and direct loans toward projects officials want to support. Unlike most regular commercial banks, CDB raises most of its money via long-term bonds. Funders cannot take that money back out until the term is up, so the bank can make longer-term loans to Chinese companies. CDB also gives borrowers very low interest rates, and, if the borrower cannot pay back the loan, it may be back-stopped by the Chinese government. This makes it easier, cheaper, and a lot less risky for solar companies to obtain financing Source: The Guardian 12 September 2011

 

The Chinese government has indicated strong support for the solar PV industry, which it considers to be a strategic sector for the country’s further development. In 2010, both Suntech and Trina Solar signed large loan agreements with the China Development Bank. In total, loan guarantees worth US$32.5 billion were offered to 10 domestic manufacturers including LDK Solar, Yingli Green Energy and Suntech. Moreover, in October 2010, the State Council issued a directive on “the acceleration and development of new strategic industries”, which consisted of a package of fiscal and financial measures aimed at supporting a set of selected industries including solar PV.” Source: China and the Future of New Energy Technologies Netherlands Clingendael Institute of International Relations March 2012


Source: www.mercomcapital.com