President Trump, Say No to Solar Tariffs

A company that can’t compete goes to the government to ask for protection from competitors. That protection, in the shape of import tariffs, limits other companies’ access to cheaper materials, which increases costs across the entire industry and ultimately forces consumers to pay more for the same product.

What could be worse? A tariff that only benefits a pair of mismanaged companies, with a history of poor financial, legal and ethical decisions.

Those are the troubling facts of a trade case working its way through Washington, D.C. presently.

Suniva and SolarWorld, two bankrupt solar cell manufactures, have exploited a rarely used provision in the 1974 Trade Act to convince the International Trade Commission that they are entitled to protection from international competition.

Following a hearing at the end of September, ITC commissioners have now presented a range of proposed tariffs on imported solar panels and cells, all of which will distort the market and undermine competition. The decision now falls to President Trump who is expected to make a decision by January 26.

Though the ITC’s recommendations fall somewhat short of the plaintiffs’ request, a proposed tariff of even 30 percent would reduce installation of new utility-scale and residential solar by nine and eight percent respectively, according to a study by GTM.

Increasing the costs of solar energy jeopardizes an America industrial success story, estimated to be worth $29 billion and 260,000 American jobs, according to the Solar Energy Industry Association, which vehemently opposes the proposal.

Tariffs will put tens of thousands of those jobs at risk while protecting less than 1,000 workers in panel and cell manufacturing, a relatively low-value, low-tech part of the supply chain that most American firms have left behind for more advanced and high-revenue areas as well as ancillary industries such as steel production needed for racking and inverters. 

The final and possibly the most depressing part of the case is that the firms seeking protection are not even American. Sunvia’s parent company is Chinese conglomerate Shunfeng International while SolarWorld is owned by a German-Qatari partnership.

Suniva stands out as a particular example of what the solar industry overwhelmingly believes is a problem of mismanagement, not competition. Bloomberg analysts encapsulated the problem when they singled it out as “a manufacturer producing a costly technology-variant at low volumes on a figuratively ancient production line [that] cannot compete against modern facilities producing cheaper technologies at scale.”

Adding to the absurdity is the fact that Suniva’s largest creditor, British-owned venture capital firm SQN, sent a letter to the Chinese offering to drop the ITC case entirely in return for the purchase of $55 million of Suniva’s equipment.

For its part, SolarWorld is hardly a paragon of good business practice. The company has a conviction for defrauding creditors in Michigan, is alleged to have exploited Oregon’s Business Energy Tax Credit program and faces allegations that it secretly imported many of its “American made” panels from Thailand.

Alarmingly, the Suniva and SolarWorld case has already started to have an impact. The potential threat of trade penalties has forced utilities to postpone or cancel new projects and hoard solar panels, driving up the price of solar cells by 40 percent in a matter of months, according to Bloomberg. Ultimately, the industry association estimates that 88,000 jobs may be lost as a result of the case.

Trade penalties like these aren’t a solution; they’re a handout that helps failing foreign company owners and their creditors at the expense of American taxpayers, consumers and workers across multiple industries. Tariffs are where free-market principles go to die.

When it comes time for President Trump to make his decision, he should consider closely which option will provide an undeserved bailout for overseas special interests and which will truly put America and her workers first.

Robert Dillon is a consultant in the energy sector and the former communications director of the U.S. Senate Energy and Natural Resources Committee.