There is more proof that laissez faire capitalism is killing our economy. For far too long, our political "leadership" has preached the virtues of "free trade." The end result has been the steady erosion of our manufacturing and technology bases. It turns out it is also killing our nascent clean energy industry.
China has been "dumping" solar panels and other solar energy products on the U.S. market at below fair market value. The effect (and undoubtedly the goal) of these hostile trade practices has been to significantly harm solar power companies in the U.S. at a time that we desperately need the jobs and the products. China's dumping of cheap solar panels is also one of the root causes behind the bankruptcy of Solyndra.
From the U.S. International Trade Commission:
The United States International Trade Commission (USITC) today determined that there is a reasonable indication that a U.S. industry is materially injured by reason of imports of crystalline silicon photovoltaic cells and modules from China that are allegedly subsidized and sold in the United States at less than fair value.
All six Commissioners voted in the affirmative.
As a result of the Commission's affirmative determination, the U.S. Department of Commerce will continue to conduct its antidumping and countervailing duty investigations on imports of these products from China, with its preliminary countervailing duty determination due on or about January 12, 2012, and its preliminary antidumping duty determination due on or about March 22, 2012.
The real question is whether the Commerce Department will have the courage to do something about China's misbehavior.
China leads the world in complaints filed against its industries with the World Trade Organization for illegal pricing practices. The most common abuse is called "dumping," where company sells a product for a much lower rate in foreign markets than domestically, often with government subsidies to make up for diminished revenue. The long-term goal is to wipe out competition in foreign markets, effectively tilting the playing field in favor of companies exporting to those markets. Here is the definition of dumping used by the Commerce Department's International Trade Administration:
Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin (home market), or at a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the dumping margin. Unless the conduct falls within the legal definition of dumping as specified in U.S. law, a foreign producer selling imports at prices below those of American products is not necessarily dumping.
The World Trade Organization has a set of requirements for how cases of industrial product dumping are to be handled. These procedures show how to gauge the extent of dumping and then evaluate the impact on domestic industries.
There are many different ways of calculating whether a particular product is being dumped heavily or only lightly. The agreement narrows down the range of possible options. It provides three methods to calculate a product’s “normal value”. The main one is based on the price in the exporter’s domestic market. When this cannot be used, two alternatives are available — the price charged by the exporter in another country, or a calculation based on the combination of the exporter’s production costs, other expenses and normal profit margins. And the agreement also specifies how a fair comparison can be made between the export price and what would be a normal price.
Calculating the extent of dumping on a product is not enough. Anti-dumping measures can only be applied if the dumping is hurting the industry in the importing country. Therefore, a detailed investigation has to be conducted according to specified rules first. The investigation must evaluate all relevant economic factors that have a bearing on the state of the industry in question. If the investigation shows dumping is taking place and domestic industry is being hurt, the exporting company can undertake to raise its price to an agreed level in order to avoid anti-dumping import duty.
The ruling of the U.S. International Trade Commission regarding dumping of solar energy products by China satisfies these requirements. Now it is up to the Commerce Department to decide whether to levy a tariff on solar panels and modular components from China and how much.
The price manipulation by the Chinese companies is substantial, with initial estimates of the dumping margins between 50-250%. In other words, a tariff of at least 50% would be required to bring prices for Chinese solar products up to fair market value.
This decision is critical for whether we will have a robust domestic solar industry or will be forced to import solar products for the foreseeable future. We have the research and development capacity to design solar products in the U.S. We have long been a world leader in that technology. We also have ample manufacturing capacity and a work force eager for employment. Ramping up small- and large-scale generation projects would allow expansion of energy production without increasing carbon emissions. Good jobs and clean energy is a win-win proposition.
The Obama administration has been accused of being slow to investigate and act on complaints of dumping.
Although the U.S. has filed just two anti-dumping cases against Chinese exports at the WTO, many U.S. industries and businesses have accused China of illegally dumping products in the U.S. market at below value.
One can imagine some of the rationalizations to justify neoliberal trade policies. China owns a big chunk of our debt. Lax campaign finance regulations in the wake of Citizens United allow China and Chinese companies to launder money through the U.S. Chamber of Commerce and other soft money bundlers. Big box retailers and other importers have an army of lobbyists with buckets of cash pleading for cheap imports from China. We need China to address international hot spots like Iran and North Korea. A trade war would destabilize the global economy and/or irritate the "good" people on Wall Street. In short, the special interests would complain. Too bad. Kill the Bush tax cuts, slash defense spending back to 2001 levels and the deficit disappears. Enact meaningful campaign finance reform. Push sustainable economic practices instead of cancerous growth. These are changes I can believe in. Export the neoliberal economists to another planet.
The Obama administration needs to be reminded that it has been hurt politically by China's dumping of solar components, not to mention the taxpayers and the employees of a large U.S. solar energy manufacturer.
The slumping price of solar equipment was a factor cited by the Energy Department in assessing the bankruptcy of Solyndra, the solar module manufacturer that the Obama administration provided with a $535 million loan guarantee.
New York Times, Dec. 3
Between dumping by China and the short-term nature of government incentives for clean energy, the deck has been stacked against U.S. solar companies.
Free trade, like the free market, does not exist, has never existed, and almost certainly will never exist. Perhaps it is time to occupy the Commerce Department. We need jobs and clean energy. If the Commerce Department responds ineffectively to the solar products dumping case, it is likely game-over for domestic companies. Asking the Chinese to play nicely does not work. Just ask the U.S. steel manufacturers and workers.
I am sure the deficit hawks will squawk, but we also need a big push for research and development at the government level.
In 2009, according to the Pew Charitable Trusts, China surpassed the United States and other members of the G-20 for the first time as the leader in clean energy investment. Last year clean energy investment in China totaled $34.6 billion, compared with $18.6 billion in the United States. Last month, Chinese officials announced they will spend $75 billion a year on clean energy.
"In China, the policy has gotten very aggressive," said Peggy Liu, chairperson of the Shanghai-based Joint U.S.-China Collaboration on Clean Energy. She said Chinese officials are trying out a range of new technologies: "It's like throwing spaghetti on the wall. They're very open to experimenting."
Let's put that into perspective. $75 billion is chump change. That is what we spent in six months during the war in Iraq. All we got from that misadventure was a bunch of dead Iraqis and Americans. It is a question of priorities and oversight.