Will Oremus posts on Slate.com on May 3, 2012:
“The American solar industry isn’t united behind this idea, though. Last fall, just one month after SolarWorld formed its lobbying group, the Coalition of American Solar Manufacturers, the U.S.-based companies that lease and install solar panels formed their own trade group, the Coalition for Affordable Solar Energy. While CASM cried for tariffs, CASE lobbied against them, warning that such protectionism could spark a solar trade war with China. A trade battle, the solar installers argued, would drive up prices, hurting the financing and installation sector of their American solar market, which accounts for more jobs than the manufacturing sector. Moreover, China might retaliate with anti-dumping cases against the high-tech companies that refine silicon, a crucial material in solar panels. In that scenario, everyone would lose.”
“As the Commerce Department launched its investigation of China’s trade practices last fall, the fight between U.S. manufacturers and installers grew vicious.”
Although the U.S. pioneered photovoltaic solar cells decades ago, it has fallen increasingly behind lower-cost manufacturers of the technology in countries that offer low-cost labor and few environmental restrictioins, including China, South Korea and Malaysia. The cheap panels have been fueling a fast-growing solar consumer market in the U.S. and have opened vast opportunities for service-sector jobs in the sunlight-extraction business.
The matter comes to a head in May, when the Commerce Department will announce a determination on a possible second round of tariffs on Chinese-made silicon-based photovoltaic cells, which convert sunlight into electricity and are by far the most popular solar technology.
While tariff advocates say that protecting a solar manufacturing base is crucial to the nation’s energy security, others argue the U.S. has already lost that footrace. Instead of swooping in to rescue remaining plants, they say, the focus should be on reducing the cost of solar to speed liberation from fossil fuels, which dovetails with the goal of reducing unemployment.
Cost is a key factor in getting businesses and homeowners to convert to solar power, and the recent failure of Solyndra was primarily due to the company’s inability to compete with low-cost silicon-based photovoltaic cells manufactured in China and sold in the U.S. The growth in service jobs has tracked closely to the falling costs of photovoltaic cells, often the most expensive item in any installation. Thanks largely to aggressive pricing by Chinese manufacturers, the cost of solar panels has fallen 28 percent in the last 12 months, according to data from research firm Solarbuzz. This translates to an effective 40 percent premium to purchase U.S.-manufactured cells.
If tariffs on Chinese cells come in as high as many predict, they could raise the out-of-pocket cost of such an installation by $1,250 — and commercial projects by far more. But what China is doing is unfair and our government must address the unfairness, not only in this industrial sector but in others, or the U.S. will continue to deindustrialize and become dependent on outsourced manufacturing.
According to reports, as recently as five years ago, China was a bit player in solar, far behind in both quality and cost. Then the Chinese government threw its weight behind its solar manufacturers, offering low-cost loans and other subsidies, leading to a massive production increase that dwarfed competitors.
Today, seven of the 10 largest solar cell manufacturers in the world are based in China. Only one — First Solar in Tempe, Arizona — is a U.S. company, and it does the bulk of its manufacturing overseas in countries such as Malaysia. Last week it said it would lay off 2,000 workers worldwide and close a German factory, blaming, in part, the low cost of Chinese cells.
Although American scientists are still at the forefront of emerging solar research, the challenge is how can we make traditional solar panels at the lowest cost and continue to innovate with new technology that delivers greater performance at less cost?
“You have 12 U.S. solar manufacturers that have had significant downsizing, closures or bankruptcy in the last two years,” SolarWorld’s Ben Santarris said. “The government of another country should not be able to decide whether an industry can survive in this one.”
As reported previously (http://foreconomicjustice.com/?p=610), the focus has shifted to Chinese practices that many American companies and trade experts agree are more onerous and threatening to the future of U.S. economic security. China has in recent years moved to erect various rules and policies aimed at protecting its lucrative market from foreign domination while nurturing its own national champions to compete globally.
The Chinese economic strategy is shifting away from attracting multi-national foreign direct investment to unfairly supporting Chinese-owned companies. China is now adopting policies and rules that pressure foreign firms to share technology with Chinese companies, or the Chinese government, as a condition for doing business in China.
For well over a century the federal government was largely financed by tariffs averaging about 20 percent on foreign imports. All the way up to 1972 tariffs were generaly well over 7 percent and in most years averaged 20 to 30 percent. Tariffs kept our home-based manufacturing strong. Americans expected to pay more for foreign products than those Made In The USA. Now we pay far less for Chinese-made products than the American equvalant or non-equavelient becuse those American products are no longer made in the U.S. We need a much stronger tariff policy. The high-profile failure of solar equipment maker Solyndra was attributed in large part to a sudden influx of low-cost Chinese panels, despite the advanced solar technology developed by U.S. engineers working at Solyndra.
Part of the problem is that the U.S. government has held back with a lack of government initiatives to support the unleasing of the full technological power of computerized robotic superautomated manufacturing, which would significantly lower costs but employ far less people. What consistently is missed is the necessity to unlock job-destroying technology with the empowerment for ordinary citizens––working people, the middle class and the poor––to benefit from insured capital credit to become individual owners of new productive capital that will bolster our manufacturing capabilities and at the same time significantly improve quality and performance and lower costs of products and service as investment in the American economy grows. This will result in “real” job creation with more and more people earning two incomes, one from their labor worker input and a second income from their capital worker input, which over time will become their dominant source of economic security.
The U.S. government must respond to China’s unfair trade practices with much higher tariffs than just 2.9 to 4.73 percent if we are to restore a strong manufacturing sector in the United. States.
The U.S. government should impose robust import levies and tariffs (tax) on particular classes of imports that are determined to be manufactured outside the United States and exported back to the United States that do not qualify as “Fair Trade” and unfairly undercut an American-make equivalent. At present, American corporations are increasingly abandoning the United States and its communities to invest in productive capital formation outside the United States, particularly in China, Mexico, India, and other parts of Asia. As a result, America is experiencing the de-industrialization of America. Such overseas operations have the advantage of “sweat-shop” slave labor rates relative to American standards, low or no taxation, supportive infrastructure provisions, currency manipulation, and few if any environmental regulations––which translate to lower-cost production. Thus, producing the same product or service in the United States would be far more expensive. For most people, economic globalization means a growing gap between rich and poor, technological alienation of the labor worker from the means of production, and the phenomenon of global corporations and strategic alliances forcing labor workers in high-cost wage markets, such as the United States, to compete with labor-saving capital tools and lower-paid foreign workers. Unemployment is high and there is an accelerating displacement of labor workers by technology and cheaper foreign labor, resulting in greater economic uncertainty and unstable retirement incomes for the average American citizen––causing the average citizen to become increasingly dependent on government wealth redistribution programs.
We need a policy change, which assures truly “Fair Trade” and that exponentially reduces the exodus of our manufacturing prowess and invigorates America’s entrepreneurial exceptionalism and competitive spirit to create products and services in the spirit of “the best that they can be.” We need policies that will de-incentivize American multichannel corporations and others from undercutting “American Made,” while simultaneously competitively lowering the cost of production through expanded capital worker ownership. At present, the various incentives in place do not broaden capital ownership but instead further concentrate ownership.
