Countervailing effect and mitigation policy: A game-theoretical study in dual international competing photovoltaic supply chains

Abstract

As the world trade conflict intensifies in the photovoltaic (PV) industry recently, it would be important and timely to investigate the impact of the countervailing measure on the global PV supply chains and the non-conventional trade policy to mitigate the worsening trade effect. A simplified dual international competing PV supply chain system is developed to formulate supply chain game-theoretical models for the investigation. It is found that export subsidy (ES) scenario creates the highest total demands, supply chain profits and social welfare but at the cost of the importing country before it escalates to the most serious countervailing (CD) scenario. The key findings echo the classical trade conflict studies that any unfair trade policy will benefit only the country exercising the policy and will eventually lead to escalation of the trade conflict and bring economic damages to the trading stakeholders. A theoretical policy analysis is conducted to explore the impact on the supply chain when the export subsidizing country shares its economic gains with the importing country who might be planning to levy the countervailing duty on the imported solar product. The finding shows the gain sharing policy is possible to offset the economic loss and hostility of the importing country but still create more economic gains for the export subsidizing country. The gain sharing concept, though still in its theoretical phase, provides a more sustainable policy than the conventional retaliation approach which hinders the global solar supply chain growth, and prolongs the current head-on trade conflict between largest world economies.