Pentagon cannot buy Chinese solar panels anymore

The military appropriations law signed by Obama on January 7 contains a little-noticed "Buy American" provision for the US Defence Department purchases of solar panels — a clause that is likely to dismay Chinese officials preparing for the Hu-Obama summit, The New York Times reported.

Hu is scheduled to visit the United States from January 18-21 for talks with Obama and other American leaders.

The United States is the world's largest importer and China the largest exporter of goods — simmering resentments over trade in green-energy technologies could be a distraction at the Obama-Hu summit, the report said.

China has emerged as the world's dominant producer of solar panels in the last two years. It accounted for at least half the world's production last year, and its market share is rising rapidly. The United States accounts for USD 1.6 billion of the world's USD 29 billion market for solar panels.

The perception that Beijing unfairly subsidises the Chinese solar industry to the detriment of American companies had drawn concern in the US Congress.

The new Buy American provision prevents the Defence Department from buying Chinese-made solar panels.

The American military is a rapidly growing consumer of renewable energy products, because it is extremely expensive and frequently dangerous to ship large quantities of fuel into remote areas of war-torn Iraq and Afghanistan.

The solar panel provision is carefully written to help it comply with the free trade rules of the WTO, which would make it hard for China to ask a WTO tribunal to overturn the provision, the report quoted trade lawyers as saying.

Chinese leaders have strongly criticised such provisions in the past, particularly one in Obama's economic stimulus package in early 2009 that applied to government procurement of steel and construction materials.

While the US and Europe have focused on subsidising buyers of solar panels, China has emphasised subsidies for solar panel manufacturers. It then exports virtually all of its panels to the US and Europe, often helped by the American and European consumer subsidies, the Times said.

Ocean Yuan, the chief executive and president of Grape Solar, a company in Eugene, Oregon that distributes mostly mainland Chinese solar panels but also American, Japanese and Taiwanese panels, said that imported panels typically cost 20 per cent less than American-made panels.

Grape Solar sold USD 500,000 worth of Chinese-made solar panels to the American military shortly before Christmas, Yuan said, adding that he expected future contracts to specify American-made panels.

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