Trade Barriers—Crisis and Challenges Faced by Export-Oriented Small and Medium-sized Enterprises’ PV Products Going Overseas

01  Business Dilemma under Trade Barriers

As we all know, China has a huge photovoltaic industry and is the most important exporter of photovoltaic products in the world.The change of tariff policies of various countries has an significant impact on the establishment of trade protection policies for domestic goods and the export of Chinese photovoltaic products.

Taking the photovoltaic products exported to the United States as an example, just when domestic suppliers thought that the dawn of victory was coming, the U.S. government announced on February 4 that it would extend the global protection measures for photovoltaics (Measure 201). Let us turn the time back together. On May 17, 2017, the US government launched a global safeguard investigation on imported crystalline silicon solar cells and modules. Then on January 22, 2018, the United States imposed a global safeguard tariff on imported solar panels.

Take the United States as an example. To find out its cause, is that the trade war is an insurmountable topic. The trade friction between China and the United States directly affects the tariffs on imported and exported goods. For example, in March 2018, the United States proposed imposing new tariffs of up to $50 billion to $60 billion on Chinese imports. In April, it announced a list of about 1,300 Chinese goods that it said could impose 25% tariffs on these products. On June 18, U.S. President Donald Trump threatened to impose more tariffs on $200 billion worth of Chinese products. On September 18 of the same year, China and the United States announced the third round of mutual tariff imposition. China has also imposed corresponding sanctions on the US offensive. But in multiple rounds of competition, the global economy has become the biggest loser. The photovoltaic industry, which was originally intended to be exported to the United States, has also been hit to a certain extent. On the other hand, the then US President Trump put forward the concept of “America First”, pursued isolationism, and was bound to restore and revitalize the domestic manufacturing industry in the United States. Trump has made the return to manufacturing one of his six priorities, and “buy American goods and hire American workers” as his economic strategy principle. In addition, the Trump administration proposed to “decouple” from China, introduced relevant fiscal and tax policies, and required American companies to return to China to set up factories. The resulting trade protections have dealt a heavy blow to suppliers who want to export to the United States.

In view of the huge domestic market of the United States, and the United States is also vigorously developing clean energy, for domestic manufacturers, it should have been a good export dumping country. However, due to the above-mentioned reasons, export-oriented photovoltaic enterprises, especially small and medium-sized enterprises(SMEs), are undoubtedly a major deficiency. To make matters worse for SMEs, in 2021, commodity prices across the entire industry chain will rise, coupled with soaring shipping costs, many SMEs will experience operational difficulties. In this trend of attacking from inside and outside, export-oriented SMEs urgently need to find a way out.

02  Many possibilities under the trade dilemma

Actively expand various overseas markets

Despite facing many trade barriers, under the global trend of vigorously developing clean energy, the author believes that there is no need to be overly pessimistic about the future of export-oriented central enterprises. Let us first look at a set of data. From the perspective of photovoltaic product exports in 2021, our country’s photovoltaic product exports from January to October were about 23.1 billion US dollars, an increase of 44.6% year-on-year; photovoltaic module exports were 82.2GW, a year-on-year increase of 32.2%; The export value of photovoltaic modules was 19.83 billion US dollars, a year-on-year increase of 44.8%. Traditional photovoltaic markets such as Europe, Japan, and Australia maintain strong demand. Emerging markets such as Pakistan and Greece continue to emerge. The GW-level market has grown from 11 in 2018 to the current 20. Wang Bohua, honorary chairman of the China Photovoltaic Industry Association, emphasized that the photovoltaic market has changed from being dominated by Europe to blooming all over the world, and the international trade impact resistance of China’s photovoltaic industry has been greatly enhanced.

A set of data from 2020 shows that in terms of export market distribution, the top ten overseas markets are mainly the Netherlands, Vietnam, Japan, India, Australia, Brazil, etc. The total value of exports accounted for more than 2/3 of the total exports. Among them, China’s photovoltaic modules exported to the European market the most, reaching 29GW, achieving a substantial increase of 27%; exports to Vietnam achieved doubled growth, with the number exceeding 11GW. Judging from these two sets of data, for export-oriented photovoltaic companies, the market is still huge.

Although new trade barriers also emerged in India in February this year. In a letter to India’s Minister of New and Renewable Energy, the National Solar Energy Federation of India has made a strong case for the Covid-19 pandemic to delay projects being deployed by PV developers, noting that they could face mandatory levies The question of basic tariffs. However, the remaining market is still in a relatively open environment. For many small and medium-sized enterprises, actively adjusting their export strategies, changing their business routes, and expanding new overseas markets can improve their ability to deal with risks brought by trade barriers. . Especially for the Western European market and the Southeast Asian market, with the deepening of China’s Belt and Road Initiative, exporting goods by land transport can also avoid the risk of rising sea freight prices.

How to continue to develop the US market

Nonetheless, in the face of the huge US market, it is not easy to give up easily. Entering the US market is a fantasy for small and medium-sized enterprises, or is there a trace to follow? Let’s go back to the timeline of the China-US trade war again to find answers. In 2018, the G20 leaders of China and the United States reached a consensus. A 90-day truce was concluded. The U.S. has lowered tariffs on $200 billion worth of Chinese products to 10 percent. According to a 2020 report, in the course of the trade war, although the trade deficit between the United States and China was slightly reduced, the overall trade deficit increased by 22.8% from 2016 to 2019. The reason behind this is that China lost Orders from multinational companies did not come back to the United States, but were instead imported from third countries.

In addition, triggered by the black swan event of the COVID-19 in the winter of 2019, the epidemic caused a large-scale shutdown of production in the United States, and the manufacturing industry continued to shrink. According to data from the U.S. Department of Commerce, in the first quarter of 2020, the U.S. gross domestic product (GDP) fell by 5% at an annual rate, down 0.2 percentage points from the initial data, the largest quarterly decline since the worst of the international financial crisis. To sum up, although the United States strives to ensure the recovery and development of local industries, in the trend of globalization, excessive unilateralism cannot last for a long time. For export-oriented small and medium-sized enterprises, if they want to export to the United States, they need a keen political sense, always pay attention to the development of the situation between China and the United States, and whether they can maximize their own business during the easing period of the trade war to avoid future trade. new risks that may arise in the war.

03 Conclusion

The rise of trade barriers has indeed affected the operation of export-oriented small and medium-sized photovoltaic enterprises. However, in the environment where the global market is improving, if companies can adjust their experience and strategies in a timely manner, assess the situation, and invest in technological innovation, they will certainly be able to cope with the challenges of going overseas.