President's protectionist levy widely criticised as both pointless and damaging to US manufacturing, but could the tariffs soon be struck down by the WTO?
President Trump has approved a 30 per cent 'safeguard' tariff on imported solar cells and modules, prompting a wave of criticism from the global green economy that the move will result in job losses and the cancellation of billions dollars of investment in the US solar sector.
Announced yesterday, the White House approved the levy after recommendations from US trade representative Robert Lighthizer amid concerns that increased foreign imports of solar cells and modules - particularly from China - "are a substantial cause of serious injury to domestic manufacturers".
The decision places a 30 per cent levy on solar cells and modules imported into the US during the first year of the move, falling to 25 per cent in year two, 20 per cent in year three and 15 per cent in the fourth year. The first 2.5GW of imported solar cells, however, are exempt from the levy, which applies only to silicon panels.
The move follows separate "antidumping and countervailing duty measures" imposed on Chinese solar products and US polysilicon last year, over which the US said it was entering talks to find a resolution that ensures "sustainable trade throughout the whole solar energy value chain, which would benefit US producers, workers, and consumers".
China already dominates the global solar supply chain and is also looking to increase its capacity, Lighthizer claimed, adding that he sought the views of domestic solar producers in making the tariff recommendation. "The President's action makes clear again that the Trump Administration will always defend American workers, farmers, ranchers, and businesses in this regard," he said in a statement.
However, the protectionist move is widely seen as a major blow to the wider US solar sector, which supports around 260,000 jobs and relies heavily on low cost imported solar panel products. Experts said the levies could hit investment in new solar projects, but would have little impact on the prospects for US-based manufacturers, who will struggle to scale up to meet any new demand and will continue to face fierce competition from rivals with lower cost bases regardless of the new levies.
US trade body the Solar Energy Industries Association (SEIA) said the tariffs would increase solar manufacturing prices, effectively causing 23,000 US job losses this year while leading to the delay or cancellation of billions of dollars worth of solar investments.
According to Abigail Ross Hopper, SEIA's President and CEO, the tariffs will make it difficult for US cell and module manufacturing to meet demand and "create a crisis in a part of our economy that has been thriving". Last year the US solar sector's revenues rose to more than $200bn.
James Watson, SolarPower Europe's CEO, added that the trade tariff could have many unforeseen consequences on solar manufacturers. "I would hope that in this age of solar we would see fewer barriers to solar rather than more," he said. "These types of barriers simply slow the energy transition and give highly polluting forms of power generation longer life."
A host of commentators, including former NYC Mayor Mike Bloomberg, also slammed the move arguing that far from protecting and assisting the domestic US solar industry, it would in fact damage the very US manufacturing jobs which Trump has repeatedly said he wants to support.
Taxing solar panels up to 30% will destroy U.S. jobs, raise Americans' electric bills and hurt our environment. Congress should stand up for American workers and consumers and overturn the administration's harmful decision. https://t.co/TBdgQ1LluV— Mike Bloomberg (@MikeBloomberg) January 23, 2018
And, with the US solar industry particularly strong in California and Texas, others have pointed out that the import tariff will disproportionately hit several states - including some of those which voted for Trump - much harder than others.
Trump's solar import tariff will disproportionately affect these six states, which are due to install the vast majority of planned new solar capacity:— Simon Evans (@DrSimEvans) January 23, 2018
(TX, NC, AZ & FL voted for Trump)https://t.co/f13KfOWfXE pic.twitter.com/AZa95Yc0D8
US energy experts also chimed in on the debate, raising concerns of an impending trade war with the China. Science and technology academic Varun Sivaram said the "pointless" tariffs were a "decade too late to matter" and would also likely result in retaliation from the Chinese government.
Sivaram said the massive scale of solar production capacity in Asia had driven down prices, and meant manufacturers in the region were now more than capable of winning brutal price wars with the US, regardless of the White House's actions.
"Expect minimal investment in US solar factories (any that are built will be highly automated), net US job destruction as higher solar panel prices shave the boom in solar installations by 10 per cent, and Chinese trade retaliation," he said in a statement. "Ultimately, the WTO may well rule Trump's tariffs illegal."
Indeed, as The Hill reports, the provision under which Trump has taken the action has been used rarely and such tariffs "are almost always" struck down by the World Trade Organisation (WTO), which is precisely what happened the last time the White House tried to impose tariffs on steel imports on 2001.
The move follows comments from the director general of the International Renewable Energy Association (IRENA), Adnan Z. Amin, last week, who emphasised that global free trade and low costs "benefits everyone in the long run".
"Basically the position we've been taking on this is that not every economy has the same capabilities," Amin told reporters. "The strength of the US market is installation and maintenance and not manufacturing, so in fact if you impose penalties on the producers of solar PV panels, you are penalising yourself. There is an energy transition happening. We need to make sure that we have a free market and free trade for clean technology."
Protectionism, he said, would only serve to harm the US in the long run, arguing it should instead look to "follow the principles that we followed in the early stages of the industry, which is let the best technology win".
"That's what creates cost reductions and value in the global marketplace," he said. "It's essentially a classical free trade argument. The lowest cost benefits everyone in the long run."
With auctions for solar projects in some parts of the world last year attracting unprecedented low bids of less than two cents per kilowatt hour, the global progress of clean energy is unlikely to be stymied for long by the White House's actions.
But with a high chance of the WTO striking down the tariffs before they even hit, the White House is likely to simply view the levies as an opportunity for a quick win with its core base of Rust Belt support that allows it to attack two of the President's pet hates - Chinese manufacturing and clean energy - in one swoop. The fact that the move looks set to actively damage the US economy while doing next to nothing to aid American manufacturing does not seem to have overly bothered anyone in the administration.
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