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America’s Solar Industry in the Dark

The Solyndra bankruptcy debacle has left the solar panel industry sweating bullets, reminding everyone in America’s solar industry of the rising heat from abroad. In an effort to force the government to provide some shade, 7 solar panel firms filed a case with the International Trade Commission and Department of Commerce last week against anti-dumping practices of Chinese solar panels. I agree action must be taken. However it is of vital importance such retaliatory action be proportional to the violation and not cascade into an avalanche of protectionism.

No new earth shattering accusations have been made, just the ones nearly every American manufacturer has at some point raised. The Chinese government has imposed numerous restrictions on panels and parts, they provide massive low interest loans, practically gift land in large grants to domestic firms, hand out funds to state owned firms, and, of course, the manipulated currency is an additional 25-40 percent subsidy to exporters. Still, broken records can make good points – even if you can replace it with a new one from China for a fraction of the cost.

A great deal of research has taken place on the matter of government protection of infant industries. To do nothing is to forfeit and weaken our competitiveness in a particular field. But if we assist strategically and, most importantly, temporarily, protection can do wonders. This is how the West first got rich and it is how the Asian Tigers became worthy competitors. The US gets only one tenth of one percent from solar, with comparable figures worldwide. Solar easily qualifies as a strategically important infant industry and justifies some protection.

Already several of China’s largest firms are preparing to move operations to the US in anticipation, such as Grape Solar and Suntech. This seems to vindicate the approach.

But there is more at stake. Too much protection will weaken the US Solar industry by making it uncompetitive, drive up prices for consumers, and slow the transition from fossil fuels. If special interests see this as a new opportunity, more protection could be sought for non-strategic industries that could ultimately weaken the US economy. Not to mention we risk a trade war with the second largest economy.

Obama has been quiet since the Solyndra incident, especially with Evergreen Solar, another firm to receive considerable Federal assistance, wallowing in the misery of bankruptcy. All this talk of strengthening the economy, all this chat about making jobs, yet Obama has been too weak on the subject of international trade with China. At the same time Romney and Perry are overly blunt with their criticism, demanding immediate revaluation of the Renminbi and other policies which they do not understand the ramifications of. If Romney and Perry stick to what they actually are saying, then a trade war with China is likely.

Neither the president nor the Republican candidates are investigating the potential of imaginative international trade policy and incentives for investment. They must if the recovery is to strengthen.

 

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