Current tariffs in the United States were introduced by Trump in 2018 with some having been retained after a review by the Biden administration in February this year. Currently, American firms can only supply 35% of the solar panels required in the United States as the country seeks to move towards ambitious clean energy goals by 2035 with demand increasing by over 9% a year. Politicians and even those within the industry itself argue this would not be possible without imported panels from Southeast Asian countries such as Thailand.
Just a week after the USA Asean summit in Washington DC, the Thai Ministry of Commerce finds itself preparing to do battle with its counterpart in the United States which at the end of March launched a probe into two Thai based firms who exported over $1 billion worth of solar panel units to America last year. A negative finding by the International Trade Administration, the US agency carrying out the investigation, could cripple the emerging sector in the kingdom with both firms involved representing an investment of over ฿9 billion. The firms, which are part of larger worldwide concerns with Chinese links, are suspected of being vehicles to circumscribe US tariffs on the sector which have been imposed since 2012. This investigation and the profile of both firms involved offer an insightful view into Thailand’s effort to modernise its industrial base, particularly in an industry, solar-powered energy, where the kingdom has ambitious plans for the future. The situation also shows a new reality emerging across all sectors where the United States is moving to decouple its trading and operational relationship with China, a trend that has been underway for some time within this industry but which is being impeded by China’s strategic dominance.
Two leading Thai companies engaged in the manufacture and export of solar panels have until May 27th next to respond to a probing questionnaire issued by a key agency at the US Department of Commerce as it recently stepped up its investigation into allegations that large Chinese firms are using countries such as Thailand as a base to circumvent hefty US tariffs imposed between 2012 and 2018 by both the Obama and Trump administrations to protect the US solar panel manufacturing industry from ‘dumping’.
The tariffs imposed represented up to 250% of the retail price of solar panels in the United States at the time.
It is well known in the industry that global operators had begun to look to outsource their production to countries since that time to other countries such as Southeast Asia including Thailand.
Donald Trump imposed the present tariff regime in 2018 which many US players now want to see scrapped in favour of the fight against climate change
In 2018, President Donald Trump introduced more wide-ranging tariffs on solar panels using Section 201 of the 1974 Trade Act with a 30% levy declining to 15% in the final year.
On February 4th, President Biden responded to conflicting signals from the solar panel industry and US environmentalists who wish to prioritise the transition to clean energy by a decision to let some of these tariffs lapse while retaining others.
The tariff regime has seen the United States triple its solar panel manufacturing output in recent years but it still only accounts for less than 35% of the demand for panels from the industry which is installing 23.6 Gigawatts a year as the country seeks to meet a key 2035 target date to develop cleaner energy.
The junior US Senator from Nevada, Democrat Jacky Rosen, who won her seat by defeating the Republican incumbent in 2018, has emerged as an opponent of the probe by the Commerce Department announced at the end of March this year.
This was after Senator Rosen along with Senator Jerry Moran from Kansas introduced a bipartisan bill in Congress this February titled the Protecting American Solar Jobs and Lowering Costs Act which called for the abolition of Trump-era tariffs under Section 201 and an enhanced budget instead to incentivise and directly support the US solar panel industry.
Most new solar panels installed in the US are being made in Southeast Asia in countries like Thailand
The vast majority of solar panels being installed in the United States are now coming from Southeast Asia including countries like Thailand while the United States itself still has no manufacturing capability when it comes to the production of solar cells.
This situation led to a recent op-ed by key leaders in the US solar panel industry and the national drive to develop solar energy in the United States arguing that any attempt to impose tariffs on Southeast Asian countries such as Thailand would see a negative impact on efforts to fight climate change.
The writers included Mr Tom Kuhn of the Edison Electric Institute representing investor-owned US electric firms, Heather Zichal of the American Clean Power Association, a group campaigning for cleaner and cheaper renewable energy sources for the US power grid and Abigail Ross Hopper, the Chief Executive Officer of the Solar Energy Industries Association representing the industry itself.
‘Make no mistake, if the complainant is successful, solar energy will become as much as two to three times more expensive than it was just one year ago, setting back our efforts to achieve independence, putting hundreds of thousands of U.S. jobs at risk along with the Biden administration’s renewable energy goals.’
Small US firm’s complaint leads to current enquiry
The current probe stems from a complaint made to US authorities by Auxin Solar in San José California, a comparatively small US firm with just 45 employees and a turnover of under $10 million a year, that Chinese solar panel giants have been using Southeast Asian countries to evade the tariffs currently enforced by US authorities.
An investigation was announced at the end of March with an initial or preliminary finding expected at the end of August this year and a final finding by April next year into the concerns raised.
Thailand shipped $2.18 billion worth of solar panel products out of the kingdom in 2021 to several countries according to data available from the Ministry of Commerce.
These include Vietnam, China, Japan and Hong Kong with the United States being the largest market accounting for 49.1% of products exported or $1.07 billion.
In California, Auxin Solar, led by Chief Executive Officer Mamun Rashid, in his complaint to the International Trade Administration, the agency at the US Department of Commerce carrying out the probe, noted that while imports from China in respect of solar panels had declined by 86% since the tariffs were imposed in 2012, corresponding imports from Thailand, Malaysia, Vietnam and Cambodia had surged by 868%.
California firm seeks to retain tariffs and their extension to protect the US solar panel industry
The claims by advocates of scrapping the tariffs have been rubbished by Mr Rashid who described the current campaign as ‘classic fear-mongering tactics’ in action.
‘We are grateful Commerce officials recognised the need to investigate this pervasive backdoor dumping and how it continues to injure American solar producers,’ he declared in response to the current probe by the US Department of Commerce into firms in Southeast Asia including the two in Thailand.
This ongoing investigation and case highlight the difficulties faced by the Biden administration when it comes to the solar-powered industry where China appears to have developed, at least up to now, strong control over the world’s supply chain networks.
The case also offers an insight into Thailand’s relationship with Chinese firms and the links between the country’s economy and Chinese based supply chains.
Tariffs seen growth in the US solar panel industry but not enough to meet the demands of ambitious climate change goals set by the Biden administration
China’s dominance of the industry may have been countered by the US tariffs imposed in 2012 and 2018 but the two goals of gaining a more significant trade advantage and supply chain security against the overarching goal of fighting climate change appear to be mutually exclusive, at least in the short term.
The US solar panel industry is currently growing at over 9% a year with rising domestic markets where a 6-kilowatt residential system can be bought for $16,620.
This comes with offers of tax credit and rebates towards the costs while savings are substantial, immediate and for the long term.
In the case of Thailand, there is no doubt that with the country’s climate and its abundance of sunshine, that solar-powered industries should be a key objective of the kingdom.
Thailand’s ambitions for the solar energy sector
The Thai government has recently launched solar panel powered riverboats running along the Saen Saep canal from Bang Kapi to Minburi in Bangkok.
These quieter, more energy-efficient and cleaner forms of transport critically represent the future and showcase just what is possible with a strong solar panel industry based in the kingdom.
These boats are a visual image of the country’s efforts to harness solar energy across its industry but particularly concerning transport and Thailand’s transformative goal of developing advanced electric-powered vehicles.
Thailand’s Agriculture and Cooperatives Ministry has also announced that it plans to distribute solar panels to farms across the country which can help reduce Thailand’s dependence on external fossil fuels by achieving a possible 20% to 30% reduction in electricity costs in the next 15 to 20 years.
Pilot projects in relation to this are currently underway which envisage using solar-powered panels on tractor vehicles, rice milling machines and solar panel powered drones to spray crops among other applications.
Two Thai based solar energy firms are world leaders, one headquartered in Canada, the other in China
The two solar panel firms based in Thailand and which are the subject of the US probe are acknowledged as world-class and both have substantial investments in the country.
Canadian Solar Manufacturing Thailand Co., Ltd and Trina Solar Science and Technology (Thailand) Co., Ltd were both established in Thailand in 2015 and represented an investment of over ฿9 billion in the kingdom’s economy when they set up operations in Chonburi and Rayong respectively at that time.
We do not know for definite how many people are employed in Thailand by the two manufacturers in Chonburi and Rayong with third party trade profiles for both firms suggesting a workforce of fewer than 100 people each.
In recent years, however, we have seen ongoing recruitment efforts by both firms for Thai staff who have degrees and can speak Chinese fluently by both firms.
Canadian Solar, an industry leader in solar panel manufacturing, is headquartered in the city of Guelph in southwestern Ontario in Canada.
Dr Shawn Qu, once a Chinese student who moved to Canada in 1987, now heads a Nasdaq listed firm
The company was set up by Dr Shawn Qu, the son of two university professors who grew up in China during the cultural revolution before moving to Canada in 1987 as a student.
He founded his company there in 2001 based on supplying solar panel facilities to keep car batteries charged for Volkswagen in Mexico.
Dr Qu’s company later set up a factory in China and a huge order from Volkswagen followed in 2004 which set his firm on course to becoming one of the world’s largest solar panel manufacturers with up 14,000 employees worldwide and a revenue of over $3.5 billion.
It is listed on the US Nasdaq and is seen as a reliable performer in the industry.
Dr Qu said last year that his firm was only ‘warming up’ and that its prospects were driven by the ‘global political will’ to fight climate change at this time
In October 2021, Dr Qu in a statement to mark the 20th anniversary of the company, remarked that his firm was still only ‘warming up’ and pointed out that solar energy still only represented 4% of the global energy mix.
He also linked the future of his company to the ongoing fight against climate change.
‘We are supported by the global political will to accelerate global deployment to fight climate change,’ he told employees of the firm here in Thailand in a video posted on the firm’s actively managed Facebook page.
Canadian Solar Manufacturing Thailand Co., Ltd is based in the Sri Racha district of Chonburi province which is part of the Thai government’s flagship Eastern Economic Corridor (EEC) and has a registered capital of ฿6.15 billion.
Trina Solar’s investment in Rayong Thailand was supported by a $160 million financial facility part-funded by Siam Commercial Bank and a Chinese bank
Trina Solar led by Chairman Gao Jifan was founded in China in 1997 and is headquartered in Shanghai where it is also currently listed on the local stock exchange.
In 2015, it announced it would develop a manufacturing facility in Rayong province representing an investment of $160 million through a Thai subsidiary Trina Solar Science & Technology (Thailand) Ltd which has a registered share capital of ฿3.1 billion.
Economic setbacks for Thailand since the US-China trade war opened up in 2019 despite reports of some firms seeking bases outside China within the EEC
The factory is located in the Pluak Daeng District of Rayong province which is also within the Eastern Economic Corridor (EEC) operated by the Eastern Special Development Zone Policy Office and covers the three eastern Thai provinces of Chonburi, Rayong and Chachoengsao.
The project was partially financed by a ฿1.5 billion or $43 million line of credit from Thailand’s oldest commercial lender, Siam Commercial Bank as part of a syndicated loan agreement for a total of $100 million financed in association with China Minsheng Banking Corporation Ltd (CMBC) which matured in 2020.
Initially launched on the New York stock exchange in 2006, then went private and refloated in Shanghai
The company was initially listed on the New York Stock Exchange in late 2006 but ten years later, it announced that it had been taken over for $1.1 billion and went private.
It was later listed on the Shanghai Stock Exchange in 2020 where shares jumped 100% after the initial flotation.
The company, in 2020, reported revenues of $29.418 billion and in 2021 confirmed a workforce of 17,586 people.
Additionally, the firm is known to have scores of worldwide patents related to solar panel technology.
Tariffs introduced because of China ‘dumping’ on the US market in 2011 to preserve its market dominance
The US Commerce department’s probe follows the imposition of tariffs in 2012 after it had ruled in 2011 that China was dumping solar panel products in the United States in an attempt to force competition in the industry to go under.
The view formed by US authorities is that China, through both government agencies and bank networks, had nurtured this particular supply chain area to achieve world dominance in the sector.
The questionnaire sent in recent weeks to eight firms across the four countries including the two in Thailand includes requests for full disclosure of the beneficial ownership of the companies concerned as well as detailed information on the production processes being employed.
Questionnaire sent to Thai firms to be completed by May 27th asks for beneficial ownership details and details of solar panel manufacturing operations
If US authorities determine that the processes involved in the manufacture of solar panels and modules in Thailand and other Southeast Asian countries are ‘minor or insignificant’ in that they simply involve the importation of the products from China with minor assembly and packaging operations then this may result in new tariffs being imposed or other measures.
There is growing opposition to the current investigation by US authorities not just in Southeast Asia but also in the United States among players in the industry and politicians who see the possible failure to defeat climate change as more important than opening a new front in what is an ongoing and escalating trade war between America and China.
In Thailand, the Minister of Commerce Jurin Laksanawisit, in early April, sent a formal letter to key US officials explaining Thailand’s opposition to the investigation and lodging a protest.
Foreign Trade Department at Thailand’s Ministry of Commerce coordinating a campaign against the move
Mr Jurin addressed his protest to the US Secretary of Commerce Gina Raimondo just days after the investigation was launched.
Ms Raimondo was among key US officials who met ASEAN leaders including Thai Prime Minister Prayut Chan ocha last week in Washington DC during the course of the US Asean Summit.
Thailand also, through the Foreign Trade Departments at the Ministry of Commerce has sent a letter outlining its concerns to Ms Marisa Lago, the US Under Secretary of Commerce for International Trade.
This is part of a campaign by the Commerce Ministry being coordinated by the Director of the Foreign Trade Department, Mr Pitak Udomwichaiwat, who is working with all parties concerned in Thailand to defend the kingdom’s interests in thematter.
In the meantime, the US Department of Commerce has issued a statement to point out that its actions, at this time, are part of an enquiry process and that no determination has yet been made in the matter as provided for by legislation.
‘Commerce will conduct an open and transparent investigation to determine whether circumvention is occurring. This inquiry is just a first step, there has been no determination one way or the other on the merits, and no additional duties will be imposed at this time.’