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Abstract: In January 2018, President Donald Trump announced steep tariffs on solar imports, at once plunging the US solar industry into uncertainty and deeply angering vital trade partners such as China, South Korea, and the European Union.
The tariffs were in response to a complaint made by two bankrupt solar companies seeking protection against cheap solar imports. The companies invoked a rarely used provision of the 1974 United States Trade Act, Section 201 (safeguards), and argued that antidumping and countervailing duties imposed on China in 2012 had done little to stem the flow of solar products because Chinese producers had simply moved production to countries such as Malaysia and South Korea, where the duties did not apply.
Five years after enduring a series of bruising trade battles, the global solar industry was once again in the eye of a rapidly escalating trade storm. Amid an unprecedented number of trade disputes at the WTO, the role of safeguards had suddenly taken center stage. Yet, the application of safeguards in the global trading system had been historically rife with problems.
This case is designed to be taught in follow up to HKS Case 1992.0: Shaping the Future of Solar Power: Climate Change, Industrial Policy and Free Trade.
Learning Objective: The case traces the history of safeguards from the GATT to the WTO, against the backdrop of a global solar industry shaped as much by falling prices as geopolitical currents.
Students follow the next chapter in the solar trade war saga to gain an in-depth understanding of the role of safeguards in trade agreements, while exploring how application of safeguards has been problematic. In unpacking the trade-offs associated with safeguards, students also gain a deeper understanding of factors such as trade diversion, fair vs. unfair trade, etc.
Robert Z. Lawrence
Pages (incl. exhibits):
United States and China
Joseph B. Tompkins, Jr. Fund for Case Study and Research