SolarWorld, a Portland-based maker of solar panels, may soon receive trade tariff protection. Suniva, an Atlanta panel maker, is in line to receive the same treatment.
SolarWorld and Suniva sought protection under a safeguard provision (often referred to as a 201 case) that can be used in response to a surge in imports — even if they do not otherwise violate any trade agreements.
How did the U.S. lose its edge in the production of solar panels? After all, the United States has a several decade history in promoting solar power. In response to the energy crisis of the 1970s, the United States adopted a mix of tax incentives, loans and grants. Support returned periodically in response to the fluctuation in energy prices and, during the Obama administration, as part of a response to climate change.
Germany and Japan also created incentives for the use of solar panels and separate incentives for their home industry to make the panels. As for the United States, increased solar power offered a reduction in dependence on imported energy. In Germany, the focus on solar power also responded to the Green Party (a probable partner of Chancellor Merkel’s new government) and to Germany’s move away from nuclear power. Solar use received added emphasis in Japan after the nuclear accident at Fukushima led to a shutting down of nuclear power plants that had provided 30 percent of Japan’s electricity.
What happened? The short and long answer is China. China saw the potential of solar power and provided extensive support to encourage the growth of its panel manufacturers. The Chinese efforts led to a drop in prices of 80 percent between 2008 and 2013. The result has been devastating for domestic producers in Germany, Japan and the United States. For instance, SolarWorld’s German parent had already declared bankruptcy.
By using the 201 approach, the tariffs or other trade protection would be applied across the board to all imports, thus avoiding a foreign company’s attempt to shift production to another country. The International Trade Commission, an independent federal agency, voted 4-0 in favor of a finding that injury from imports had occurred. The next step will be a recommendation by the ITC to President Trump that could come early in November. The President will then have 60 to 90 days to make a decision to accept, reject, or modify the recommendation of the ITC.
The lobbying of the President is already underway. Leading the charge is the Solar Energy Industries Association, representing the industry that installs the panels. The SIA argues that the lower cost imported panels help them compete against other forms of power, letting them keep and create thousands of jobs. SolarWorld and the other panel makers argue that slowing foreign competition will let them add thousands of manufacturing jobs, a priority for President Trump.
The battle between the panel makers and the installers is parallel to the battle over steel imports and other imported goods. Steel producers point to competition from foreign subsidies, dumping or other factors to argue that U.S. industry is at risk. Users of imported steel note that applying tariffs on imported steel will add to the cost of domestic housing and potentially raise the cost or exports that depend on steel. Both argue that thousands of jobs are at stake. The steel and aluminum industries also emphasize that they are critical for national security and should receive trade protection under the national security provision of the trade law.
On October 31, the ITC suggested a series of remedies for the domestic manufacturing industry ranging from tariff-rate quotas (tariffs rise after a certain volume of imports), higher tariffs that will decline over time, with some commissioners calling for negotiations especially with China. The remedies fell short of what the domestic manufacturers had requested, leading to predictions that job losses (for installers) and job gains (for manufacturers) would be reduced.
The President’s focus on manufacturing has led to debates over jobs. But laying behind many of the trade-related cases are two generic challenges: First, the manufacturing base also supports America’s national security and is part of America’s innovation system; Second, America is facing foreign economic systems that often give foreign producers an advantage.
How President Trump weights the balance of near-term jobs, innovation, national security, and responding to different economic systems will determine whether or not the sun rises again on Oregon’s solar panel industry.
Kent Hughes is a public policy fellow at the Woodrow Wilson Center in Washington, D.C. He is a 1958 graduate of Pendleton High School.