Tariffs reveal Trump's backward stance on renewables

Tariffs reveal Trump's backward stance on renewables
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The Trump administration continued its tough stance on trade this week by announcing steep new tariffs on imports of solar panels. 

The tariffs stem from a Section 201 petition by two ailing domestic producers — Suniva and SolarWorld. They argued to the International Trade Commission that U.S. manufacturers suffer undue material injury from low-priced foreign goods. The U.S. government agreed, and now Trump has authorized new duties to the tune of 30 percent

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Trump claims the U.S. is defending itself against other countries’ unfair trade practices. But the economic and legal rationales for his trade action are weak. In fact, solar industry tariffs are simply the latest illustration of America’s shortsighted resistance to renewable energies.

 

It’s revealing that these new tariffs divide opinion within the solar industry. While cell manufacturers have been struggling, the industry as a whole grew significantly in recent years. This growth is fueled in large part by affordable cells produced abroad, mainly in countries such as South Korea and China.

The boom in solar production has lead to significant job growth in related areas. Only a relatively small portion of the 260,000-plus workers employed in the solar industry actually produce cells. A much larger majority works in installation and other related fields.

Unfortunately for these workers, the Solar Energy Industries Association predicts that Trump’s move will “slash demand” and lead to significant cost increases. According to the SEIA, this will put several tens of thousands of these jobs at risk as protectionism slows the industry. 

The slowdown is expected to be immediate and dramatic. Industry research predicts that orders will fall by a full 50 percent over the next four years. Given current projections, that means the opportunity cost of Trump’s tariffs amount to more gigawatts than the United States' current total capacity.

Put another way, the U.S. is losing a chance to double its consumption of cleaner energy.

The response from the White House has been to ignore the bigger picture. Consistent with America’s lack of political will to embrace renewables, Trump would rather champion a few jobs for short-term political gain than make meaningful investments in forward-thinking infrastructure. It’s no surprise from a president who boasted about his commitment to reviving the coal industry.

Yet, if U.S. producers are lagging behind, it’s not because of unfair trade policies. It’s because of a lack of leadership on renewables. Rather than supporting a burgeoning industry, the U.S. has failed to make meaningful investments in solar technology on par with global competitors. This, in spite of the fact that demand has grown among America’s private enterprises.

Rather than answering the call for alternative energy, the White House continues to hide behind allegations of discrimination by America’s trade partners. 

It’s perhaps no coincidence that Trump’s latest announcements come one week after the Office of the United States Trade Representative issued a damning report on China’s trade practices. That report contained a lengthy list of ways in which China has, allegedly, failed to meet its obligations under World Trade Organization law. Subsidies like those applied to solar feature prominently on USTR’s list. 

In the case of solar, it’s true that Chinese producers benefit from large-scale government investments in renewables. These subsidies allow China’s solar panel manufacturers, some of which are partially state-owned, to sell cheaply abroad. As a result, seven of the top 10 solar panel manufacturers by volume are Chinese.

So, are China’s solar policies unfair? Subsidies are a persistent source of controversy in international trade. About 20 percent of all WTO disputes involve subsidies. However, they are not strictly illegal under the global trade regime. Subsidies are carved out as one of the core exceptions to the WTO’s rules regarding the “national treatment” of traded goods.

The U.S. could reasonably pursue a similar strategy. Instead, we are seeing the first major protectionist move against East Asian economies — countries that Trump has had in his crosshairs since the 2016 campaign. 

In an effort to quell concern, Trump has already denied that there will be a trade war. However, his move drew the immediate ire of Beijing, which called for calm, and from Mexico City, which called the policy “regrettable.”

Whatever the outcome from the inevitable war of words, it’s a contest that wouldn’t be necessary at all if the U.S. has a coherent policy on renewables. In the absence of such a policy, the White House will continue to rely on blunt policy instruments.

These instruments leave U.S. workers worse off and fail to take seriously the pressing need to reduce reliance on fossil fuels.

Jeffrey Kucik in an assistant professor in the School of Government and Public Policy at the University of Arizona.