President Obama's Commerce Department is Fumbling Biggest Anti-Dumping Case In History

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Solar Eclipse at Commerce

One of the biggest antidumping cases in recent memory is barely out of the gates, and President Obama's Commerce Department is already fumbling it. The dubious handling offers a revealing glimpse of the "enforcement" plank of Mr. Obama's trade policy in action.

The case involves imports of Chinese solar cells worth more than $1.5 billion so far this year—the Chinese imports that supposedly killed off Solyndra. Another American manufacturer, SolarWorld, argues that the Chinese are selling their products in the U.S. at a price less than their cost of production (dumping) and also that the Chinese companies benefit from subsidies (grounds for countervailing duties to offset the price advantage).

Commerce has launched an investigation, but this one is anything but typical. For starters, the department says it will perform detailed investigations of only two Chinese exporters out of the 80 that have responded to the dumping allegations. Commerce chose the two Chinese exporters, Suntech and Trina, with the largest U.S. market shares, but combined they account for less than half of Chinese imports by value. Left out is Yingli, the third major Chinese exporter to America, despite Yingli's request to be included.

This arcane methodological trick could have expensive consequences for the Chinese companies and for the estimated 100,000 Americans involved in selling and installing panels using Chinese cells. Commerce relies on in-depth analyses of sample companies to understand the cost structure for the entire industry in antidumping cases. Those companies then qualify for an antidumping duty rate tailor-made for them based on data they provide to Commerce, while every other producer pays a rate that's the average of those calculated for the sample companies.

Commerce has said that it believes Suntech and Trina have dumping margins well above 200%, compared to less than 50% for Yingli. If those numbers survive an investigation, all Chinese exporters could face antidumping duties above 200% (the average of the Suntech and Trina margins), instead of a lower figure that could emerge if Yingli was included.

Meanwhile, Commerce already has discredited its probe of the two companies it will investigate. Bureaucrats typically start by determining which products, exactly, they're studying. There are several kinds of solar cells, and the department needs to specify what kind is at issue, a process for which it usually solicits industry input. But Commerce already has sent out detailed questionnaires about business costs and the like without designating precisely which items it wants to know the production costs of. Like the prisoner in Kafka's trial, the Chinese companies don't know what product they have to explain.

What explains this methodological flub? Who knows? The Department says it lacks the resources to investigate more than two companies in any great detail. But that hasn't stopped it from conducting detailed studies of three or more companies in other cases, such as imported refrigerators from Mexico, that cover far smaller trade volumes. U.S. trade judges have ruled the lack-of-resources excuse out of bounds under American law in other cases.

A cynic might spot a political motive. Amid the Solyndra scandal, some would consider higher dumping margins helpful in arguing that Chinese competition was especially "unfair." Never mind that Solyndra manufactured a different, more expensive, technology and made a string of business mistakes.

Whatever the cause, this will become an economic and diplomatic headache if some adult doesn't intervene soon. The move risks creating ill will in a major trading partner when Mr. Obama is keen to tout export promotion to boost American jobs. The case worsens the economic and political damage from antidumping laws that already punish such basic business practices as differential pricing.

Decisions as important as this one leave room for political discretion, and one of Mr. Obama's appointees at Commerce could fix this quickly by instructing the bureaucrats to rethink their approach. China may succeed in pressing the Administration to do this anyway, so the sooner the better.

http://online.wsj.com/article/SB10001424052970203430404577097533361342386.html