Tariffs On Chinese Solar Might Help Prevent The Next Solyndra

Dave Johnson

You have probably heard about a solar-energy company named Solyndra, but probably what you have heard is a bunch of negative, conspiratorial, anti-alternative-energy, anti-Obama stuff from the corporate/conservative spin machine. The real story is that our government is trying to help us capture some of the new green energy industry that will create the jobs of the future. But China is, too. And China doubled down, and then quadrupled down on government support. They even directly subsidize their companies so their products cost less. This helped put Solyndra out of business. But the Obama administration is doing something about it.

The Problem

China cheats, and we don’t usually do anything about it. They let companies pollute, don’t do much about worker safety, pay low wages, and make people work long hours. So-called “free trade” lets companies cost us more than 50,000 factories in the Bush years, and millions of jobs. And it empowers companies here to tell their workers to shut up and behave and accept wage and benefit cuts, or they’ll send their jobs to China, too. We continue to just let China take jobs, factories and industries because powerful interests, like Wall Street, make tons of money off of it.

We all know that China manipulates its currency, which means that goods made there cost less in world markets. But China does a lot more than just that. They target strategic industries and do everything they have to do – legal or otherwise – to capture those industries. They subsidize companies, provide free energy and land and buildings, let them pollute, and set up rules that don’t let companies from other countries sell things inside China. They let companies steal the plans and methods and other intellectual property. They do all kinds of things, because they see themselves as a unified country, and see us as a competitors they have to beat.

One of those strategic industries China is shooting for is solar energy. Earlier this month Leo Hindrey wrote about the problem: China’s Latest Target in Its Trade War Against American Manufacturing: The U.S. Solar Industry,

The extensive subsidies that China lavishes on its state-owned enterprises (or SOEs), from currency manipulation to low- and even no-cost loans, from free power and water to forced technology transfers and hoarding of rare earth minerals, have caused at least 18 million U.S. jobs, both direct and indirect, to be off-shored to China in the last decade. With these massive subsidies, Chinese manufacturers — including the Chinese subsidiaries of and joint ventures with U.S. manufacturers — can deliver products to market more cheaply than U.S.-based manufacturers operating without such subsidies.

These unfair subsidies and practices have impacted numerous U.S. industries, but none more so than America’s solar manufacturing sector. According to the U.S. Department of Energy, the Chinese government has handed Chinese solar manufacturers more than $30 billion in subsidies in just the past few years. Not surprisingly, this largess has tipped the competitive balance in favor of the Chinese manufacturers. So far, 12 American solar manufacturers have either been forced to close or downsize, with significant job losses. The American companies are simply not competitive in the face of China’s tilting of the playing field.

It’s not just subsidies, it’s also theft, as Hindrey explains,

As bad as the Chinese employing unfair trade practices to gain an upper hand over American solar manufacturers is the fact that the Chinese are using U.S. know-how as the backbone of their current solar manufacturing industry. This technology was blatantly pilfered from U.S. companies in the same way that the Chinese have made the theft of other American intellectual property the mainstay of their internal manufacturing policy.

Doing Something

Our government is finally doing something, at least about the solar panel issue. By imposing a modest tariff they are helping US-based manufacturers. By not imposing too high a tariff, they are helping keep overall solar-panel prices down which helps us fight the fossil-fuel energy monopoly.

In the news:
NY Times: A Measured Rebuttal to China Over Solar Panels,

The Commerce Department said on Tuesday that it would impose tariffs on solar panels imported from China after concluding that the Chinese government provided illegal export subsidies to manufacturers there.

The tariffs were smaller, at 2.9 to 4.73 percent, than some American industry executives had expected. At that size, their effect on the market could be limited. But additional tariffs could be imposed in May, when the Commerce Department is scheduled to decide whether China is “dumping” solar panels into the United States at prices below their actual cost. A finding of dumping would result in additional tariffs that could be far larger than these.

… A few Chinese companies have acknowledged receiving substantial government assistance. Executives at Hunan Sunzone Optoelectronics, a solar panel manufacturer in Changsha, in south-central China, said in interviews in 2010 that they had been able to buy valuable land near downtown for a third of the citywide rate for industrial land. And the company said that Chinese bankers had offered large loans at just 6 percent interest — below market rates at the time — with the provincial government paying much of the interest.

WaPo: Commission imposes low duties on Chinese solar panels,

The Commerce Department announced Tuesday it will impose small import duties on Chinese-made solar cells, disappointing a handful of U.S. solar panel makers who complained of being undercut by subsidized Chinese firms and who wanted stiffer penalties.

China’s Interesting Response

LA Times: China offers measured response to U.S. tariffs on solar panels

China’s state media said U.S. import tariffs imposed on Chinese solar panels are “sensible” and a “result of compromise” but warned that bilateral ties are still in jeopardy because of Washington’s tougher stance on trade.

… “The U.S. government’s lighter than expected tariffs on China’s solar panel imports reflects some degree of rationality, but it has to do more to keep bilateral trade ties from derailing,” the commentary said.

Here is what appears to be part of the story of China’s muted reaction. China did what China does, subsidizing their companies in an attempt to put manufacturers in other countries out of business. And it is working. But this works against China’s even larger strategic interest to get off dependence on oil. But putting everyone else’s solar companies out of business keeps oil prices high. So they are backing off. From the LA Times story,

… Prices for solar panels have nosedived, putting competitors in the U.S. and Europe out of business.

China’s central government has acknowledged the problem, recognizing the proliferation of low-margin solar panel manufacturers undermines their ambitions to ramp up sustainable renewable energy sources.

“We will prevent blind expansion in our capacity to manufacture solar energy and wind power equipment,” Premier Wen Jiabao said in a speech last week at the annual meeting of the country’s legislature.

Huang Ming, chairman of Himin Solar Energy Group and a pioneer in the Chinese solar industry, said he expects half of China’s solar panel producers to shutter in the near future. He also estimates that up to 95% are failing to turn a profit.

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