Viewpoint: Growing U.S. Solar Industry Doesn't Need New Tariffs and a Trade War with China

March 5, 2012
The proposed tariff will reduce U.S. exports overseas, hurting American companies and threatening American jobs.

In her Viewpoint article, "What's Really Happening to America's Solar Industry?", Michele Hoff-Nash supports SolarWorld's call for special tariffs of up to 250% on some solar panels and modules imported from China.

However, SolarWorld doesn't speak for most of America's solar industry, and its arguments don't reflect "what's really happening" in this sector. While SolarWorld claims the support of a group called CASM (Coalition for American Solar Manufacturing), the real chasm is between SolarWorld's contentions and the industry's condition.

In fact, SolarWorld is a German-owned company with a facility in Oregon. Its business -- solar cell manufacturing -- accounts for only about three percent of U.S. solar industry jobs.

Meanwhile, the great majority of Americans solar companies are in other sectors of the industry, including other areas of manufacturing. Some companies produce polysilicon -- the key component in solar cell manufacturing. Others manufacture the machinery and equipment used to produce solar cells and modules. Still others develop residential, commercial and utility solar projects or install solar panels on residential and commercial structures.

Representing over 160 companies in all these sectors, including all of the largest solar installers in 19 states, the Coalition for Affordable Solar Energy (CASE) opposes the proposed tariff and the trade war it would trigger.

Here's why:
The industry is an American success story. In spite of a sluggish annual growth rate of 0.7% in the entire economy, the U.S. solar industry, now including almost 5,000 companies, is expanding at the rate of 6.8% a year. Last year, the industry added some 7,000 jobs, bringing its workforce to more than 100,000 employees.

Most U.S. solar energy jobs are in designing, engineering, installing, maintaining and selling solar energy systems, producing polysilicon or manufacturing machinery, not in making solar panels and cells. Fifty-two percent of these jobs are in installation and maintenance -- the kind high-paying, family-supporting, blue-collar jobs that advocates for American manufacturing correctly champion. However, all of these jobs would be put at risk from higher cost solar cells.

The solar sector benefits from being globally integrated. The world's leading solar industries -- in the U.S., Germany, Japan, and China -- are manufacturing solar panels and modules on such a large scale that solar energy costs have fallen by over 50% since 2008. At long last, we have reached the point where, at current prices, utilities, businesses, developers and homeowners throughout the nation are turning to solar power as a source of safe, affordable and reliable energy.

Because solar industry customers are so sensitive to costs, huge tariffs and higher prices would depress consumer demand and destroy workers' jobs. According to the respected economic consulting firm, the Brattle Group, special tariffs on imported solar panels would result in the loss of up to 32,712 jobs related to the solar industry in 2012, 40,593 by 2013, and 49,589 by 2014. The $11 to $12 billion worth of solar projects that are planned for 2012 -- and the 24,000 new jobs that are expected to be created this year -- all might be canceled if costs increase.

If the U.S. imposes special punitive tariffs, the results will be a textbook case of the unintended consequences of public policies. By disrupting global supply chains and driving up solar prices here at home, the proposed tariff will reduce U.S. exports overseas, hurting American companies and threatening American jobs.

And there is no question that the price of solar cells will increase. As Gordon Brinser, President of SolarWorld Industries America, said in an interview with National Public Radio -- "The prices will have to increase, you know, a little." Of course, Brinser's company is seeking tariffs of 50% in one instance and 250% in two others - hardly "a little" price increase by any accepted definition of "a little." It is unclear that such a steep increase would save SolarWorld's manufacturing operations in the United States, but it is clear that higher tariffs will have a devastating impact on the rest of US solar industry where the vast majority of jobs are.

Meanwhile, China may move some of its solar panel production to other Pacific Rim economies, such as Taiwan, Vietnam, Singapore South Korea, while imposing its own tariffs on American exports of polysilicon. In 2011 alone, the U.S. exported about $670 million of polysilicon to China. While China and the U.S. skirmish over tariffs, the only winners will be countries like India, Taiwan, Malaysia, and other unnamed low cost manufacturing hubs fortunate enough to be bystanders in the trade war.

Of the issues involved in SolarWorld's trade complaint against China, some such as currency manipulation reach well beyond the solar industry. Other issues that have been raised against China could be addressed to other countries with solar industries of their own. While China is criticized for subsidizing its solar industry, the U.S., Germany, and Japan have wisely made public as well as private investments in manufacturing solar energy products, developing solar energy systems and using the electrical power that they produce. Indeed, the U.S. has rightly assisted the domestic solar industry with tax credits, research grants and renewable portfolio standards in 29 states, requiring electrical utilities to produce a growing share of their power from solar and other renewable sources.

Still, compared to its counterparts in other advanced countries, the U.S. solar industry needs to be able to count on consistent, coordinated, and comprehensive support. China, for instance, has decided to increase solar and wind power to 15% of its energy portfolio by 2020 and is making the public investment to translate this commitment into reality. Our country's public policies should put the U.S .solar industry on a fast track to a similar goal, not on a "solar-coaster" of inadequate and interrupted incentives and investments.

The U.S. and China should avoid a mutually destructive trade war and reach an agreement that benefits the solar industries in both countries. The U.S. needs steadier and smarter policies to encourage the growth of a solar industry that is already a bright spot in an economy emerging from the doldrums. To generate good jobs and clean energy, we need progress, not protectionism.

Jigar Shah is the president of the Coalition for Affordable Solar Energy (CASE) and the founder of SunEdison, a solar energy services company.

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