Hobbled, We're Losing The Global Energy Race

When the U.S. added modest “Buy American” [1] provisions to the February stimulus bill to help keep (some) U.S. assistance in the U.S. economy, people cried foul.

  -- “A classic protectionist measure,” [2] charged Senator John Ensign (R-Nev.) chair of the Senate Republican Policy Committee.

  -- “The worst instincts of Congress,” [3]declared the Wall Street Journal.

  -- “Counterproductive,” [4]accused the Chamber of Commerce.

But while the U.S. dithers, the rest of the world is moving ahead on its own terms. The New York Times reports, “China Builds High Wall to Guard Energy Industry.” [5]

Energy is key to the new economy of the future — key to end our dependence on foreign oil, advance new technologies and create new jobs. “We know the country that harnesses the power of clean, renewable energy will lead the 21st century [6],” explained President Obama in his February address to a joint session of Congress.

But leadership takes more than just hard work, technology or innovation. It takes place in a real world that isn’t always fair.

China is positioning itself for that leadership role. Just as Japan and South Korea sheltered their domestic automakers from American competition until they developed skills, products and economies of scale, China is shielding its clean energy sector while it matures and grows. The New York Times reports:

  -- China’s exports over 95 percent of its solar energy products to the United States and Europe. But China required that at least 80 percent of the equipment in its own solar power plant be made in China.

  -- The Chinese government bid 25 large contracts for wind turbines this spring — and Chinese companies won every one of them. All six competitive multinationals were disqualified on technical grounds. (Chinese companies that had never built a turbine won the contracts.)

  -- China requires 70 percent domestic content for wind turbines installed in China. European manufacturers built turbine factories in China specifically to comply — but they still don’t win contracts, and many have stopped bidding.

  -- While T. Boone Pickens delays plans for his American wind farm, China is building six wind farms twice Pickens' size – financed by low-interest loans from state-owned banks.

China isn’t alone. Public Citizen points out that the European Union and Canada [7]negotiated to exclude broad swaths of government procurement from WTO and NAFTA (for Canada) requirements.

“[W]hile the United States safeguards its preferences (only) for domestic iron and steel used in federally funded state transportation projects, Canada carves out steel, motor vehicles and coal altogether [8](for all provinces, for all sectors), and also carves out all construction contracts issued by the Departments of Transport. The EU carved out of its WTO procurement obligations contracts awarded by federal governments and sub-federal governments in connection with activities in the areas of drinking water, energy, transport or telecommunications.” [9](Links added).

So in European countries, stimulus money stays in Europe — while U.S. stimulus money is free to bleed overseas to buy imported goods and equipment. While other countries use energy to grow domestic industry, the U.S. imports solar cells from China.

This isn’t about protectionism. It isn’t about the ethics of Chinese exclusion or American freedom. It’s about the real world. [10]

While American ideologues talk free market purity, countries with intelligent, carefully considered industrial policies are pulling ahead of us. [11] This is real world competition, not game-theory in think tanks. We’re losing jobs, [12] hemorrhaging money [13] and squandering the competitive advantage [14]given us by generations before.

Next time you hear a conservative cry protectionism, think about that great wall in China [15]. This is real world competition, and we’re playing with a handicap. We can do better.