Renewable Energy, Trade War, and Domestic Jobs

This week, the US Commerce Department levied new tariffs on solar panels being produced in China following an investigation into the Chinese government illegally subsidizing solar panel exports [1-3]. While the new duties will be between 2.9 and 4.73%, they are less than expected according to China’s state run news agency, Xinhua [4]. Xinhua attributes this to “some degree of rationality;” a remark that is pretty much a slap in the face with China knowing it has the upper hand.

Additionally, future tariffs could be imposed on the import of Chinese made solar panels relating to the dumping of them on the US market at lower than actual cost [1].

Imposing the tariffs has received mixed feedback in the United States. Solar installers are opposed to the tariffs on imports saying that the increase in price of solar systems will turn customers away. Conversely, the significant drop in solar panel pricing has lead to the bankruptcy of several American solar panel producers. The most notable being Solyndra which had received a $500 million federal government loan that went unpaid.

Macroscopically, the imposition of a tariff also further strains the already weak relations between the United States and China. The United States, Europe and Japan have already brought a trade case against China to the World Trade Organization (WTO) [5]. The allegations stem from China artificially depressing the price of rare earth metals for domestic production. Rare earth metals are used in a variety of electronics and renewable energy components such as wind turbines.

With the United States’ push for renewable energy, we potentially could swap our dependence on imported oil for a dependence on imported rare earth metals. If the United States wants to get serious our energy future and security, we could just bring our rare earth mining in house. According to the US Geological Survey, we have plenty of rare earth element deposits that could fill our demand for the foreseeable future [6]. While we use to mine rare earth metals, we have since stopped because of environmental concerns. The future of renewable energy, “green” jobs, and the US economy hinges on our dependence on oil and China. We could avoid a trade war (which could one day lead to an actual war) and curtail the trade deficit while adding domestic jobs if we just start mining again (done with smart regulations) and take production and manufacturing seriously.

1 Bradsher, K. and Wald, M. “A Measured Rebuttal to China Over Solar Panels.” 20 Mar. 2012. The New York Times. 21 Mar. 2012. <www.nytimes.com/2012/03/21/business/energy-environment/us-to-place-tariffs-on-chinese-solar-panels.html?_r=1>.

2 The Associated Press, “U.S. Sets Tariffs On Chinese Solar Panels” 20 Mar. 2012. NPR. 21 Mar. 2012. <www.npr.org/2012/03/20/149004241/u-s-sets-tariffs-on-chinese-solar-panels>.

3 Lee, D. and Change, A. “U.S. to impose tariffs on solar panels from China” 20 Mar. 2012. Los Angeles Times. 21 Mar. 2012. <www.latimes.com/business/la-fi-china-solar-tariffs-20120321,0,5638526,full.story>.

4 Wang, Y., “China Voice: U.S. gives sensible ruling on China’s solar imports” 21 Mar. 2012 Xinhuanet. 21 Mar. 2012. <news.xinhuanet.com/english/china/2012-03/21/c_131480327.htm>.

5 Palmer, D. and Durfee, D. “U.S., EU, Japan take on China at WTO over rare earths” 14 Mar. 2012. Reuters. 22 Mar. 2012. <www.reuters.com/article/2012/03/14/us-china-trade-eu-idUSBRE82D07Q20120314>.

6 Long, K., Van Gosen, B., and Johnson, K., “Rare Earth Elements in U.S. Not So Rare” 17 Nov. 2010. U.S. Geological Survey. 22 Mar. 2012. <www.usgs.gov/newsroom/article.asp?ID=2642>.

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1 Comment

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One response to “Renewable Energy, Trade War, and Domestic Jobs

  1. jones1808

    I don’t really see how a 4% tax on $3.1 billion of imported solar panels will spark a trade war. In September China just lost a WTO appeal to drop the US’s 55% tariff on Chinese tires [1]. The two economies are greatly interdependent, but some of these measures are designed to protect US industries rather than penalize Chinese action. Chinese exports to the US in 2009 alone were close to $289 billion, with 62.4% of the goods allowed into the US duty-free. China allows 34.7% of US goods to enter duty-free [2].

    I understand what you are saying about rare earth supply security, but I believe the price of procurement will continue to drive that market instead of a need to produce domestically. There are still other options available for rare earths as well outside of China. Incidentally, Afghanistan is one of the richest deposits of rare earths in the world [3]…

    1. http://www.atimes.com/atimes/China_Business/MI10Cb01.html
    2. http://stat.wto.org/TariffProfile/WSDBTariffPFView.aspx?Language=E&Country=CN,US (let me know if this doesn’t load, it’s a link to selected tables from the WTO database)
    3. http://www.nytimes.com/2010/06/14/world/asia/14minerals.html?_r=1&scp=2&sq=afghanistan&st=cse

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