(U.S. green energy, China tariff vote in Congress story, updated for reaction from U.S. business community)
NEW YORK (
) -- Congress is considering slapping a tariff on Chinese imports as retaliation for China's stubbornness over currency policy, and such a move could have implications for green-energy stocks.
Green energy companies have been a focus of the economic battle between the U.S. and China. A few weeks ago, the United Steelworkers Union filed a petition with the U.S. government claiming that China's support for its green-energy companies was a violation of international trade laws.
Treasury Secretary Tim Geithner was called to testify before the Senate a week ago also, and while the Senate hearing was specifically about China's currency policy, Geithner was asked specifically about the green energy sector and the United Steelworkers petition.
The new House measure, passed by the Ways and Means committee last Friday and headed for a full vote in the U.S. House of Representatives this week, would let the United States apply duties on goods from countries with undervalued currencies. It would more or less make good on the threat to penalize China for keeping its currency artificially weak, which is the central point of debate in the economic argument over Chinese products having an unfair trade advantage.
If such a measure was passed by Congress, it might be a positive for
, the cost leader in the solar sector. The low-cost Chinese solar module makers, led by
( SOLF) and
, have been coming closer and closer to First Solar in the cost race. However, First Solar still holds a cost advantage, particularly as the price of polysilicon on the spot market has gone back up from its lows of 2009.
Any tariffs slapped on Chinese imports would give First Solar a little more breathing room versus the Chinese low-cost module suppliers looking to increase their exposure to the U.S. solar market. All the big Chinese players, from Trina to Yingli and
are increasing their sales in the U.S.
On the other hand, the U.S. solar market is still a relatively small, though growing portion of solar module sales. Additionally, the Chinese solar cost-advantage is so pronounced versus most Western companies that any tariff might not change the cost equation much, and it might not disadvantage Chinese solar companies versus the most expensive solar module makers from the U.S., like
It's going to take more than a tariff on Chinese green energy imports to make alternative energy companies in the U.S. competitive.
There have also been fears that any actions taken by the U.S. government against China could lead to retaliation against Western firms seeking to do more business in China. This fear has been cited as one reason why it was the United Steelworkers, and not the green energy industry itself, that lodged the trade complaint against China alleging unfair trade practices. Companies like First Solar, which has a huge desert project in China of 2 gigawatts over which it is still in negotiations with the Chinese government, don't necessarily want to see the U.S. government giving China reason to retaliate.
There is also the fact that the Congressional measure could easily fail to find support with all of the business interests from the U.S. linked to Chinese operations, or in the least, the measure could be left hanging in the wind for a while.
U.S. green energy companies haven't spoken up about the United Steelworkers' petition or the latest congressional measure to punish China for its currency controls. However, the American Chamber of Commerce, on behalf of companies with businesses in China including
, did hold a press briefing on Monday to state that its member companies don't support the congressional China tariff measure.
The Chamber of Commerce argues that China may retaliate against U.S. businesses operating in China if Congress takes action aimed at forcing China to revalue its currency.
Robert Roche, the chairman of the American Chamber of Commerce in Shanghai, said at a briefing in Washington on Monday that the U.S. congress is taking steps that will lead China to step up the rhetoric about the U.S. being a "bad guy," in the same way that Japan was once Economic Enemy No. 1 in China. Additionally, critics say the congressional rhetoric works against itself. Foreign pressure on China to revalue its currency will only serve to push China further from taking action, as the country may fear that it will be judged as bowing to international pressure as opposed to looking out for its own best interests.
Niche U.S. solar company
( ESLR) has moved much of its manufacturing operations to China in a bid to remain competitive, and it's unclear what impact such a Congressional measure would have on a U.S. company manufacturing in China and importing its Chinese solar modules to the States. Evergreen Solar, which is already under threat of de-listing, as its stock has traded under $1 for a prolonged period of time, wouldn't want to see any imports from China -- even those made by a U.S. company, and slapped with a tariff -- as its move to China was predicated on reducing its costs.
Chinese vice commerce minister Chen Jiao reacted to the news by saying, "We'll make a decision based on our own economic development levels and the world economic situation. If it takes the yuan to appreciate for our economy to develop, we will do it even though it would have negative impact, but it is redundant for the U.S. congress to pass the proposal."
In any event, there is no sign of a slowdown in Chinese support for its green energy companies, with shares of Chinese solar company
popping on Monday and reaching a 52-week high after the China Development Bank announced a $9 billion loan package for LDK.
The LDK loan package brings the total amount doled out by the China Development Bank to the top five Chinese solar companies to roughly $25 billion this year.
--Written by Eric Rosenbaum in New York.
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