Despite the characterization of China as one of the most polluted countries on earth, the Chinese government has focused heavily on developing green technology. The 5 year plan unveiled last year spent a significant amount of time discussing how best to develop China’s domestic green energy and included recommendations for various industries including: how to decrease carbon emissions, increase electric vehicle use, and develop solar and wind power production.
While the world is generally appreciative of China’s efforts to improve its environment, the United States has taken umbrage at the some of the methods China is using to encourage growth. In July, for example, the U.S. Department of Commerce released the results of a preliminary investigation that found that multiple Chinese companies have been illegally dumping wind power equipment on the U.S. market, selling it at far below market prices. In response, the Department of Commerce is determining whether to make temporary anti-dumping tariffs more permanent. A final decision is expected in December.
China has carved out a number of advantages for domestic producers of green technology, including a near monopoly on rare earth production, which has many green technology applications. More recently, Chinese national banks have also been increasing their investments in solar and wind technology manufacturers. All of these policies are aimed at transforming China into a producer of heavy industry and high technology.Enjoying this article? Click here to subscribe for full access. Just $5 a month.
Unfortunately China’s strong production of alternative energy infrastructure has not kept up with domestic or international demand. The world simply can’t install wind towers and solar panels fast enough. This is leading to overproduction of the equipment in China and a subsequent drop in the prices of Chinese exports.
Cheap alternative energy is good, but there is considerable concern that China is using its advantages and subsidies to unfairly control the market. Western companies, even with their own domestic subsidies, simply cannot compete with Chinese prices and capacity. Faced with this dilemma, Washington is now looking to anti-dumping tariffs to combat the problem.
For their part, Chinese sources have defended their export practices by alleging that the price calculations that determined Chinese exports were undervalued and incorrectly set. Additionally, the Chinese Chamber of Commerce has insisted that tariffs on wind towers would also harm the U.S. Wind power industry through increased prices for downstream users.
Former U.S. Congressman Don Bonker has also noted that if tariff barriers like these continue to be raised, it will have dire effects on both the Chinese and U.S. alternative energy industries. Hopefully, the possible ill-effects of a trade war in the alternative energy industry will convince both American and Chinese policy makers to proceed with caution.
Nathaniel Austin is an Editorial Assistant at The Diplomat.