The Retro Silliness of Our Green Trade War With China

By Lisa Margonelli

A new tariff on Chinese-made wind towers will not aid domestic industry. In fact, it is likely to do the opposite.

turbine tower-body.jpgA worker leans inside the shell of a wind turbine tower in an assembly workshop at Baoding (Reuters)

How very 1992.

Yesterday the Commerce Department decided to put a 13 to 26 percent tariff on Chinese made wind towers -- as punishment for "dumping" the towers in the American market at a price that may be less than cost. This follows the recent preliminary recommendation of a 31-to 250 percent tariff on Chinese-made solar cells because the Chinese government subsidizes the industry. Last week, the Chinese government filed a complaint against the U.S. for imposing the tariffs with the WTO, and so we're off to the races on a greentech trade war that feels awfully retro.

The Commerce Department's recent decisions are an attempt to return to a simpler past, rather than building a fairer future. Tariffs are not going reverse time so that the U.S. has the 27 percent share of the global solar manufacturing market that it had in 2001 -- instead of 2010's 5 percent share. Nor will the tariffs create jobs here or hasten the installation of green technologies. In fact, it is likely to do the opposite: Higher prices will dampen the installation of solar and wind here, causing layoffs in the solar and wind installation industry and rolling back the progress these green industries have made. Imposing tariffs will certainly not increase American government subsidies so that they can compete with China's.

Tariffs are an old tool for an old problem when countries subsidized domestic industries to drive exports. Today big companies span multiple countries, as do capital, supply chains, and markets. Borders are no longer the relevant identifier: The lead complainant in the solar case is a German company with a U.S.-based plant, hardly the Andy Griffith character the laws were meant to protect. Read veteran China auto industry reporter Alysha Webb's excellent Electric Vehicles blog, and you'll see a that U.S. and Chinese green startups have complex interlocking financial, intellectual, and market relationships with each other. Michigan-based ALTe LLC is wooing markets in China and the U.S. at the same time. The future is a complicated mix of cross-Pacific competition and cooperation and what we need is a new way to describe them -- coopertition, maybe -- and a new way to make them fair. But the old frameworks don't apply.

The language of the tariff case depicts Americans as victims of Chinese "dumping." But that obscures the real victims of this dumping. If anything, a worldwide supply of cheap solar panels has reallocated money from the pockets of Chinese peasants to the newly solar rooftops of Orange County yuppies. It's those peasants who should be aggrieved. They have also had to bear the brunt of some of China's other pro-green business policies. Last year 500 people rioted outside the gates of Jinko Solar, a plant which appeared to be putting poisonous waste into a local river. It is peasants in Inner Mongolia who have to live next to the five-square-mile pond of ghastly radioactive tailings produced by the mines that provide most of the world's neodymium -- a rare earth element that is crucial for electric vehicles and some wind turbines. The old metaphor of "dumping" low-price goods doesn't account for the literal environmental dumping that enables many of the low-cost goods Americans think we deserve when we go to an auto showroom or Pottery Barn.

"One off stuff" is how Jigar Shah, a solar entrepreneur and president of CASE, a group of solar companies opposing the tariffs, describes the Department of Commerce's actions. Shah has aggressively fought the tariffs, but in conversation he advocates a more comprehensive approach for the future. We need a US industrial policy to make our industries more competitive with Canada and Germany. We also need a free trade pact with Asian economies. But free trade these days is not the same as the days when it meant managing currency valuations and subsidies. A new free trade pact could include prohibitions on child labor, standards for human rights, environmental standards, carbon valuations, and incentives for making products universally recyclable. "The world is different than in was fifteen years ago." says Shah.

This article available online at:

http://www.theatlantic.com/business/archive/2012/05/the-retro-silliness-of-our-green-trade-war-with-china/257916/