Could trade in solar panels be fairer? Yes. It might also cost US jobs.

A manufacturer of US-made solar panels says the US should put up big tariffs to combat Chinese subsidies. But the case also highlights a tension between short-term jobs and longer-term innovation.

Chinese workers at a factory in Shangrao, in Jiangxi Province, handle production of photovoltaic cells used to make solar panels bound for export.

An Atlanta-based company is building the kind of trade case that should make “America Firsters” salivate.

Chinese-owned competitors are flooding the global market with cheap, subsidized products. Manufacturers in the United States, which invented the technology, are so battered by imports that they’re on their last legs.

There are just two problems in the Suniva trade case that might give the Trump administration pause:

  1. The industry in trouble is solar energy – not a favorite of the fossil-fuel-loving president.
  2. To save US solar manufacturers, President Trump would likely kill more jobs than he preserves.

That’s right. US production of the dominant solar-cell technology is sharply eroded, while the job-rich side of the industry is the installation of foreign-made solar panels. They’re so cheap that even the Chinese are losing money making them. As a result, US homeowners and businesses are snapping them up like hotcakes.

Last year, a record, the industry installed so many new photovoltaic (PV) panels that the United States added more electric-generating capacity from solar than any other source, even natural gas. Since 2012, employment has more than doubled, to more than 250,000.

That is why the industry, by and large, wants the White House to ignore the Suniva case. But the case is also a window on the tricky economics of trade. Where some experts say this case counters the notion that “made in the USA” means more US jobs, others see a question of fair play that goes beyond this one firm, because subsidies for current technologies may stifle the next wave of solar innovation.

“In any of these cases, you are going to have winners and losers,” says Matthew West, a partner at the law firm Baker Botts, who follows legal actions on trade. “This is definitely a case where Suniva is going to have an uphill climb.”

Ball not in Trump’s court yet

The industry, for one thing, has rallied around the installers rather than Suniva.

“There is no job worth saving that [should put] the other 250,000 at risk,” Abigail Ross Hopper, president of the Solar Energy Industries Association, told reporters May 15 in a conference call.

Mr. Trump might not get his chance to intervene. Suniva has filed a rarely used provision of the 1974 Trade Act for relief. Section 201, as it’s known, was last used successfully in 2001 to protect the US steel industry and would allow the US to levy tariffs on solar imports for up to four years.

But to reach the president, the case must first go through the fiercely independent International Trade Commission. And the ITC must not only find that exports were a leading culprit in injuring the industry but also that Suniva represents the industry.

So far, the bankrupt company looks very isolated. Its majority owner is actually Chinese, and has told the ITC it opposes the tariffs. Suniva’s more natural ally, SolarWorld, America’s largest manufacturer of crystalline-silicon solar cells, has also been battered by foreign imports. Its German parent company last week announced it would file for bankruptcy. Yet, the US-based company said it’s leery of a solution that would hurt all those US jobs downstream that rely on cheap imports.

Suniva has asked that tariffs be raised so that the cost of imported cells and panels would roughly double.

Even if the company gets the green light from the ITC, it’s not at all clear what the president would do. Even if he acts, a US move might not pass muster at the World Trade Organization. (The WTO nixed the steel tariffs emerging from that US case in 2001.)

Cheap solar, but at a long-term cost?

Free-trade supporters wonder what all the fuss is about. The US is getting cheap solar panels, employing hundreds of thousands of people to install them, and improving the environment by replacing fossil fuels.

But those who study Chinese industrial strategy see a familiar and disturbing pattern. China is not winning through better technology or cheaper labor. It’s winning because of loans and other trade-distorting subsidies that have allowed its manufacturers to scale up while everyone else is cutting back because of the glut in PV panels.

The US, which invented photovoltaic cells, was the dominant player through the 1990s, points out Paula Mints, founder and chief market research analyst with SPV Market Research in San Francisco. In 1996, the US accounted for 35 percent of global shipments; two decades later, it accounted for 1 percent. China, by contrast, had less than 1 percent of the world market in 2001; by 2016, it had 50 percent.

US companies with more advanced technologies can’t hope to compete in the face of such price competition. They don’t have enough sales to support the research and development that might make their product competitive, says Stephen Ezell, vice president of global innovation policy at The Information Technology & Innovation Foundation, a Washington think tank. “The world gets locked into a lower level of technical competency.”

What the world may gain in the short term with dirt-cheap solar panels, it may lose in long-term technological innovation, says Ms. Mints.

Cooperation with China possible?

Even if the Trump administration wanted to save the industry, there’s no easy solution. Tariffs imposed in 2012 didn’t save manufacturers. And at this point, not much US manufacturing capacity remains.

But others suggest that US companies have a future if they stop trying to compete in large-scale manufacturing. Even with bargain-basement prices, the best Chinese manufacturers are making money by wringing more efficiencies out of their production process, says Jonas Nahm, a Johns Hopkins energy professor who has studied Chinese solar manufacturing. By marrying Chinese process innovation with US design know-how, the industry could continue making technological strides, he says.

“There's this obsession with manufacturing” in the US, he says. With strong agreements that don’t allow the theft of US technology, “we might think about how we link up with [the Chinese] rather than competing with them.”

In his view, government’s role would shift from saving manufacturing jobs to figuring out how cutting-edge university research can get into the hands of US entrepreneurs.

Many say something needs to change.

“We need a concerted policy, and I don't think the Trump administration is really providing one,” says Usha Haley, a management professor at West Virginia University who has spent 20 years studying Chinese manufacturing and investment.

If we don’t have one, the Chinese will eventually gain enough market share that they will be able to raise prices, making solar power less competitive.

“Consumers will be the losers,” she adds. And because of less technological innovation, “we're all losers.”

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