The U.S. Should Surrender in the Solar Trade War with China

On October 19^th, a handful of American solar panel manufacturers petitioned the Commerce Department asking for the imposition of trade tariffs on their competitors in China. In response to this petition, the Commerce Department on Wednesday agreed to investigate whether China’s trade practices in the solar sector violate international law.

There are many stupid environmentalist talking points, but the stupidest is that the Chinese government is undercutting the growth of America’s solar power manufacturing industry. According to this line of reasoning, generous state subsidies allow Chinese solar panel manufacturers to dump their products onto the American market at artificially low prices.

The American solar lobby claims that China’s state owned banks are authorized to give almost $30 billion in low-cost loans to Chinese solar panel manufacturers. That figure was clarified by a top Chinese solar executive in an interview with Bloomberg. According to Jifan Gao, chief executive officer of Changzhou-based Trina, only 10% – 20% of the $30 billion has been disbursed. That’s $3 to $6 billion. Since the 2009 stimulus, the Department of Energy’s Loan Programs Office has brokered almost $1.2 billion in low-cost loans for solar power manufacturing, almost half of which to companies that have since gone bankrupt. (See: Solyndra and Beacon). More importantly, more than 30 states have imposed a green energy production quota that forces consumers to use solar panels, so there is a guaranteed source of demand for American solar panel manufacturers. This imposed demand is further boosted by regressive state and federal subsidies to upper-middle class environmentalists who install solar panels. When it comes to solar subsidies, the Chinese and the U.S. governments are both foolish to similar degrees.

Instead of an alleged disparity in the generosity of taxpayer-giveaways, the likely reason that China can sell solar panels cheaper than American manufacturers is the same reason why Chinese products fill WallMart: Labor and energy are far cheaper in the Far East.

From a birds eye view, the whole imbroglio is comical, albeit in a tragic sense. The Chinese busily build coal fired power plants to electrify solar panel manufacturing plants. Yet there is no market for solar panels in China. Rather, it exports 95% of its output to countries like America, which are dumb enough to impose Soviet-style production mandates for solar electricity. At the same time that American state governments are forcing consumers to use more expensive, intermittent solar power, the Obama administration is waging a war on coal, an inexpensive, reliable source of power. As a result of the EPA’s regulatory assault, coal companies in the U.S. (the “Saudi Arabia of coal”) are scrambling to build freight infrastructure to the coasts, so they can export their product to….China.

Environmentalists, renewable energy lobbyists, and their political benefactors would have Americans believe that the U.S. is in danger of losing a Great Green Game to China. Unless we pass this subsidy or that mandate, these solar enthusiasts argue, we will fail to keep up with the Middle Kingdom. In fact, this is a race we would be lucky to lose. Renewable energy exists only by the grace of political favoritism. When the political winds shift, the bottom will drop out of the industry. The more that solar panel manufacturing is concentrated in the U.S., the greater the job losses will be.

This point was recently made in an elegant fashion by the editors of the Toronto Sun, in the course of bemoaning Ontario’s unsustainable taxpayer handouts to solar power producers: “…since renewable energy can’t survive without massive government subsidy, when you cut the subsidy, you cut the jobs that subsidy creates.”