In our ongoing coverage of the trade complaint filed by some U.S. solar manufacturers against China, we are publishing a commentary by Gordon Brinser, president, SolarWorld Industries America. He is responding to criticisms of SolarWorld’s stance on China and its solar trade policies, including this one:
While many longtime solar-industry participants fully grasp the serious concerns posed by China’s centrally planned industrial power grab just as solar is poised to go mainstream, others, especially recent entrants, have fixated on short-term pricing advantages to their businesses. As a result, some have misconstrued or misrepresented the reasons why SolarWorld Industries America Inc. filed trade petitions Oct. 19 to hold the Chinese solar industry accountable to the laws of international trade
Among the inaccurate claims being made are that we: 1. oppose lower prices for solar modules; 2. contest the use of all subsidies to advance solar energy; or 3. want the federal government to interfere with fair competition in the U.S. market.
In fact, each of these claims is untrue.
While Chinese production, environmental and labor practices are undoubtedly poor, they are probably less efficient and almost certainly no less costly than our own. Further, we have never argued that all subsidies are inherently illegal or even improper. We have argued that the Chinese subsidies we have identified are illegal under U.S. and WTO law. Simply put, our aim is to restore the robust and legal competition that has led to steady declines in pricing for decades by preventing China’s state-sponsored industry from illegally sealing its monopoly over world production.
Sustainable competition, not a government-underwritten monopoly, optimizes efficiency, innovation, and cost and pricing reduction long term.
The trade cases are founded on a core consensus within the world trade arena that escapes many observers: While subsidies are not inherently improper, it is illegal for a nation to use them to ramp up domestic production to grow well beyond the needs of domestic consumption and then dump exports at prices below production costs into a foreign economy with the effect of destroying that foreign economy’s market and industry.
Such is precisely what China is doing. This strategy has unfolded at least since 2009, when the chief executive of a Chinese solar producer, now the world’s largest, acknowledged it in an article in The New York Times in 2009.
China now has enough solar manufacturing to produce a staggering 32 times more product than its domestic market demand. Virtually all of its production goes overseas. China’s subsidies – too numerous for even its own government to count (see Chinese government official’s comments in this article in The New York Times) – are fueling its export drive. Further, China is subsidizing its anticompetitive campaign using a variety of export subsidies, including guarantees, credit and insurance – all explicitly illegal.
Why are these Chinese government-supported activities illegal? Because the government of one country should never be allowed to intervene in the market of a foreign economy to distort its markets and eliminate competition.
China’s campaign to control the global solar market has created a market predicament that, as clearly shown from reported losses on every front, is unsustainable. Only companies that can count on long-term, strategic government sponsorship can hold out long at such artificially low pricing. Indeed, the most recent five-year plan for China’s state-controlled economy promises state sponsorship, just as it assures permanent, long-term damage to the U.S. solar industry, if these practices are left unchecked.
Of course, short-lived profits from unfair trade can handsomely benefit a relative few in a targeted country. But with solar, unfortunately, end users have not seen anything like the 40 percent to 50 percent declines in wholesale prices that have come over the past year or so. Moreover, neither the environment nor the American consumer will be long-term winners if China is allowed to continue violating international trade law with impunity as a triumphant monopolist and unilateral price-setter.
Those who have predicated their business fortunes on dumped and subsidized Chinese solar imports argue that the future growth of the U.S. solar industry depends on these illegally traded products. They are wrong – wrong from an economic perspective, wrong from an environmental perspective, and wrong from a rule-of-law perspective.
The U.S. solar market and solar installations will continue to grow with or without China’s unfairly traded goods. Solar is here to stay. The only question is whether U.S. solar manufacturing will still have a role, as it has since the 1950s, in refining solar manufacturing, innovating its products and leading the industry forward. The alternative is that China will dominate a new generation of technology that will reduce America’s dependence on fossil fuels, and we will see our increasing dependence on our Far East energy source eclipse our future potential for greater energy security.
A Chinese manufacturing monopoly would be disastrous both in the short and long term. With little, if any, transparency in its processes, China has exhibited its trade immaturity on many issues, including its intractable currency manipulation, its monopolistic tactics on rare earths, its woeful environmental legacy, and its horrendous safety record on consumer products, from pet foods to baby formula to dry wall. It is naïve to expect, and disingenuous to contend, that after investing many tens of billions of dollars in a successfully anti-competitive export drive in the West, China will keep prices artificially low.
China’s strategic plans for solar so far have unfolded precisely to plan, a testament to the Chinese government’s ability to execute its carefully controlled central planning. Indeed, even as champions of Chinese imports tout equipment and raw material exports that until recently headed East in impressive volumes, China’s government has made strides to corner these markets as well.
China’s plan to dominate the solar industry is straightforward enough to outline: A. Provide billions of dollars of domestic subsidies to build massive excess manufacturing capacity; B. Reap capital from U.S. stock exchanges without meeting U.S. securities requirements for transparency or accountability (see Pittsburgh Tribune-Review article); C. Export as much product as possible while neglecting to develop a desperately needed domestic solar market; D. Overproduce solar by employing dirty energy and abusive environmental practices (see article in The Wall Street Journal); E. Ship these so-called green products to the U.S. market in a manner that maximizes their carbon footprint; F. Sell them at prices so low that they undercut U.S. producers poised to sustainably meet all domestic demand; G. Tap U.S. taxpayer subsidies while barring non-Chinese companies from access to the Chinese market or its subsidies; H. Drive U.S. producers to go out of business or stage hundreds of layoffs (at a dozen plants in the past two years); I. Purchase the production equipment of the failed manufacturers for pennies on the dollar (see article on Chinese company Canadian Solar); and, finally and now in process, J. Monopolize control over the formerly robust U.S. supply chain, including production of equipment and raw material.
These policies are as economically unsound as they are environmentally regrettable.
Chinese importers suggest that in seeking a federal investigation, SolarWorld acted on behalf of only a dwindling number of U.S. manufacturing employers. While SolarWorld and others can hold their own against companies of any national origin on equal footing, they cannot fend off the full resolve and resources of the Chinese government. Many U.S. domestic solar producers already have been driven out of business.
But in challenging China’s illegal trade practices, SolarWorld and its U.S. allies are on the right side of the law – and history. Solar manufacturing can and should take place in the major markets where it is sold. Domestic factories can and should grow thousands of jobs for decades to come. Legal and fair international competition can and should produce sustainable price declines. Solar manufacturing, of all things, can and should embrace sustainable environmental practices.
Most industry participants believe these outcomes warrant the struggle. SolarWorld has deep U.S. roots and many long-tenured U.S. solar-industry employees, together boasting industry relationships built over more than 35 years. For our leadership on this issue, we are proud to say we have broad support from hundreds of companies, including many spread throughout the very segments that the Chinese importers claim to represent, as well as their many thousands of U.S. workers.
They, like us, are unwilling, in the name of unfairly traded Chinese products, for the U.S. solar industry to raise the white flag. We are confident our trade petitions will benefit the entire U.S. solar industry when they restore a place for fair and legal trade, high production standards and robust world competition.
We are willing to fight for this all-American vision.