America’s solar manufacturing industry should be one of the economy’s bright spots. The booming U.S. solar business is one of the few growth markets in the current economy, yet America’s solar manufacturers have faced unwarranted plant closures and job reductions in recent years. So what lies at the heart of this disconnect?
The answer is clear: China is cheating on global trade rules. China’s state-sponsored solar industry is receiving massive illegal subsidies and is illegally dumping crystalline silicon solar products into the U.S. market. The result is a decimation of American manufacturing, American jobs and fair competition. China’s violations of international law make it impossible for U.S. solar manufacturers to compete on a level playing field with Chinese solar manufacturers in our own market, let alone globally.
Consider this: Chinese solar manufacturers export nearly all of their production, and their dumping margins -- the degree that illegal subsidies help them to lower prices -- are well in excess of 100 percent. China’s exports of solar cells and panels into the U.S. increased more than 350 percent from 2008 to 2010. Incredibly, Chinese exports in July alone exceeded those from all of 2010. There is no substantive domestic market for these solar cells and panels in China; Chinese companies produce solely for export.
U.S. subsidies and markets are open to all Chinese companies, but Chinese subsidies and markets are closed to competitors. In fact, that’s part of what makes them illegal: they provide Chinese manufacturers with a preferential benefit. Plus, China mostly has not even bothered to register its subsidies with the WTO every two years, which was an obligation that China assumed when it joined the organization in 2001.
Moreover, Chinese solar manufacturers have no production cost advantage to warrant their low prices. Labor accounts for only about 10 percent of production costs. Chinese companies import raw materials and equipment from the U.S. and compete for other commodity inputs just like everyone else. Add to this their extra shipping costs and comparatively lower labor productivity, and it is clear that their pricing is impossible without massive illegal subsidies and dumping.
China’s illegal actions are undercutting fair market value and threatening to eliminate America’s solar manufacturing. The non-market-based surge in Chinese solar manufacturing and exporting has been the primary cause for a 40 percent collapse in prices over the past year. Given the cost structure for making solar products, there is no way Chinese pricing could drop this low -- in one year -- without massive subsidies and dumping as a root cause. This artificial price decline has caused seven U.S. solar manufacturing plants to close or downsize during the past 18 months, wiping out jobs in Arizona, California, Massachusetts, Maryland, New York and Pennsylvania.
Make no mistake. China has a plan for the U.S. solar power market: to gut it and own it.
We cannot allow China to get away with it. America needs a strong solar energy manufacturing base to meet rising U.S. demand as solar energy becomes more and more mainstream. The U.S. solar industry has innovated for decades to put this unique American invention -- harnessing the sun’s energy on a device made out of silicon -- into factory production at a mass scale to bring solar power into our communities. If China’s illegal support of its solar manufacturers is allowed to continue, China would gain a de facto monopoly over the U.S. market, causing thousands more Americans to lose their jobs and making America more dependent on China. Moreover, with no competition on pricing, it would become a unilateral price-setter.
That is why Oregon-based SolarWorld Industries America, in conjunction with the Coalition for American Solar Manufacturing, filed anti-dumping and countervailing duty petitions this month with the U.S. Commerce Department and International Trade Commission (ITC). We and the six other solar companies comprising the coalition together employ, directly or indirectly, thousands of American workers and represent a significant majority of U.S. production with manufacturing sites in virtually all U.S. regions: Northwest, California, Southwest, Midwest, Northeast and South. We expect the Commerce Department and ITC to complete their investigations in about a year, but their decisions can’t come soon enough.
America’s solar industry can compete with any foreign company, anywhere, anytime -- but only so long as those foreign companies adhere to international law to ensure they act on a level playing field. China, on the other hand, is committed to ensuring that its manufacturers win the U.S. solar market at any cost, even if it means massively breaking the rules to do so.
China’s solar industry is like an athlete whose team has given a bucket full of steroids. As long as China is allowed to continue cheating, there is no way America can expect to compete in the solar energy race.
Gordon Brinser is president of SolarWorld Industries America Inc., headquartered in Hillsboro, Oregon.
Errata: I had erroneously reported that SolarWorld has received subsiidies from the U.S. government. In fact, the U.S. government granted authorization to SolarWorld to apply for up to $82.2 million in ARRA-era renewable-energy manufacturing tax credits to offset more than a half-billion dollars in investment in its Oregon expansion. The company, however, has never applied for any credits under that authorization and therefore has not received any dollar benefit.