Though it is part of an administration that often promotes green energy sources, the Commerce Department prefers its own colour palette. Call it “greenback green” versus “solar green.”
The Department has announced that it will impose a tariff of up to 250 per cent on imported Chinese solar cells. The tariff is in response to alleged violations of “anti-dumping” regulations, which prevent foreign companies from selling their products below the cost of production. The Commerce Department claims that Chinese government subsidies of solar panel manufacturers enabled companies in that country to price their products so low that American manufacturers could not compete.
While the rates remain preliminary, 61 Chinese manufacturers, including major players Suntech and Trina Solar, will likely be required to pay around 31 per cent, while all others will likely be charged a rate of 249.96 per cent. The current round of tariffs will come on top of an existing duty of as much as 4.73 per cent, which was announced in March and was also triggered by the issue of Chinese government subsidies.
As I wrote last year, our anti-dumping rules are deeply flawed, allowing domestic manufacturers to effectively wield the U.S. government as a weapon against foreign competitors. Furthermore, in this case, Chinese companies weren’t the only ones receiving government support. The Obama Administration ought to be fully aware of this. President Obama used his first campaign advertisement of the season to defend the $535 million federal loan guarantee it made in 2009 to Solyndra, a U.S. solar panel firm that, despite the government support, collapsed two years later.
The problems with these solar panel tariffs, however, go beyond unfairness. Subsidized or not, Chinese solar panel manufacturers are succeeding at a task that has proven difficult for American companies: producing solar panels at a price that makes them economically attractive. The tariffs may lift solar power back out of economic reach for many American companies and consumers. Jigar Shah, president of the Coalition for Affordable Solar Energy, an American industry group that opposes trade restrictions, told Bloomberg that the new tariffs “will increase solar electricity prices in the U.S. precisely at the moment solar power is becoming competitive with fossil fuel generated electricity.”
Even with the tariffs, American companies are unlikely to gain the boost the Commerce Department seems set on giving them. Instead, Chinese manufacturers will probably move production to other countries to avoid the duties. “It’s something we’ve been thinking about over the last year already,” Isabelle Christensen, director of North American operations for Chinese solar module maker JinkoSolar Holding Co., told Bloomberg. Such a move would add to costs, but most likely would not be expensive enough to completely take away the Chinese companies’ price advantage.
While the effect on U.S. solar panel manufacturers will likely be minimal, the same won’t be true for the rest of the U.S. solar industry. The U.S. is also a key producer of polysilicon, an important component of solar panel production – and much of that is sold to Chinese panel manufacturers. Polysilicon makers have already expressed fears over the possibility of retaliatory tariffs. Even if there are no retaliatory tariffs, the cost of the U.S. tariffs to Chinese manufacturers will reduce their demand for polysilicon, cutting into the U.S. companies’ profits. Meanwhile, the higher cost of panels in the U.S. will lower demand here, taking away business from the people who sell, deliver, install and maintain solar systems.
The end result will be fewer American jobs and a setback for the solar industry as a whole. In short, less green.
There are, of course, a few winners here: the Treasury, which will get to collect the tariffs until Chinese companies are able to relocate production; SolarWorld, the German company whose U.S. division pushed for the tariffs, which will get at least a short-term advantage over its competition, courtesy of the U.S. government; and the Obama administration, which might be able to wrangle a few votes by appearing to protect U.S. manufacturing jobs – never mind at what actual cost to other domestic jobs.
The winners, however, are few, and the gains are minimal. To really encourage job gains or clean energy, we’re going to need much higher wattage policy than this.
NOW WATCH: Tech Insider videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.