The last three decades have seen a bipartisan effort to match large innovation investments with trade, tax and regulatory policies that drive the production of American inventions overseas as quickly as possible. We have created a system where American public and private funds develop new technologies and launch startups that demonstrate viable commercialization only to have Chinese firms swoop in and filch the patents, jobs and economic returns with no technological or market risk. This has happened in market after market. Solar photovoltaic (PV) power serves as a poster child for this process and one where we still have a small window of opportunity to save our investment. The U.S. International Trade Commission (ITC) has unanimously concluded that Solar World and Suniva suffered injury from China gaming trade rules. It is now up to President Trump to determine what action is appropriate by the end of this month.
[Greg Autry | January 4, 2018 | Forbes]
Silicon solar PV was developed at Bell Laboratory in 1953 and its first significant practical application was powering America’s second space satellite, Vanguard. In the decades that followed, American taxpayers continued to fund space missions that pushed the bounds of solar power performance. In the 1960s and 70s, NASA sent solar powered probes to Venus and Mars while also testing demonstrator terrestrial solar power stations in remote villages on Earth. American space applications continue to push the boundaries of solar PV performance. After the moon, International Space Station is the brightest object in the night sky. The primary cause of that brilliance are the station’s massive solar arrays which contain 275,000 silicon cells manufactured by Boeing’s Spectrolab division.
Today, demand for residential and commercial installations in the U.S. is booming. Solar is a common sight on roof tops and parking lots across the country. You’d assume that American solar producers and solar panel factory workers would be enjoying the good times created by our national investment in this technology. Sadly, as has been the case with so many American innovations, nearly all the growth and all the jobs are in China.
The Obama White House famously promoted and backed solar manufacturing, immediately before feeding them to the Chinese. While President Obama hosted Hu Jintao at a White House state dinner, Chinese firms dumped their panels on to the U.S. market. They went on to snap up the remains of many of their vanquished American competitors. Some of these firms were actually owned by that nation’s predatory government and all of them were heavily subsidized. Meanwhile, China’s cyberwarfare program, run by the PLA Signal Corps’ group 61398targeted and compromised U.S. solar firms in support of their national dump and acquire attack plan. According to the FBI and U.S. prosecutors, Chinese solar firms competing in the “free trade” friendly American market were provided access to the internal cost and pricing documents of their U.S. rivals. Security firms assert that the Chinese group was inside the network of nearly every major American company, so it’s reasonable to assume that when it came time to buy up the assets of America’s solar firms, the Chinse negotiators likely had the private emails of their American counterparts.
A 2012 lawsuit documented that Chinese firms had “employed a complex scheme, in collaboration with each other and raw material suppliers and certain lenders, to flood the United States Solar market with solar panels at below-cost prices.” The Chinese firms settled for a few tens of $millions, keeping the business and acquiring a lot of valuable patents and assets in the U.S. By 2015, when President Obama hosted Xi Jinpeng at the White House state dinner, China completely dominated the global solar PV panel market.
The “upside” to Chinese dumping, was that all these below cost solar panels drove a feeding frenzy in the U.S. solar installation market. Consequently, many solar installers are eager to defend their subsidized position. They assert that any response to China’s trade attack will inflict harm on the U.S. economy. Firstly, I find the claim that installation firms are entitled to profit from the theft of U.S. intellectual property (much of it developed at taxpayer expense) obscene. Secondly, the installation business is subsidized by federal and state governments as well as by regulated utilities to the tune of 30% to 50%! I support those subsidies and they are a significant part of the reason I have 1200 watts of Solar PV on my roof (when SunPower actually made them in California) charging my two electric cars (made in California by Tesla). However, it’s hard to understand how helping solar installers compete against cheaper forms of domestic power generation is good, while providing assistance for manufacturers in the face of a coordinated foreign attack would be a “non-competitive welfare handout.”
Finally, it’s really important to understand that manufacturers are higher net contributors to national economies than service firms. US Bureau of Economic Analysis data shows that the manufacturing sector generates an additional $1.33 in economic activity for every dollar in goods sold, that’s twice what most service firms produce. This is primarily because manufacturing plants require more substantial infrastructure investments and feed a complex domestic network of suppliers and service providers. Installers are mostly a fleet of vans packed with ladders, hand tools and those Chinese panels.
We now have a handful of American firms, nearly all of them backed by foreign money, struggling to stay afloat. Americans used to believe that investments in high-technology R&D paid off with jobs and economic growth. In a global economy, American innovation does not automatically naturally translate into American employment, wealth and tax receipts. Capturing the best jobs and sustainable economic growth requires that we retain manufacturing of the products that emerge from our research. Until now, we’ve done the opposite. Placing a tariff, price floor or quota on imported solar panels would be not only just, but also provide the President with the perfect opportunity to demonstrate that he intends for American workers to benefit from the advanced technologies we develop and fund.