Trade panel puts solar tariff decision in Trump’s hands

Source: By ERIC WOLFF, Politico • Posted: Monday, September 25, 2017

President Donald Trump is pictured. | Getty

President Donald Trump has not weighed in on the case so far, though his administration has re-opened the landmark NAFTA agreement with Mexico and China. | Saul Loeb/AFP/Getty Images

 A federal trade panel declared Friday that surging imports of solar panels have hurt U.S. manufacturers — a decision that will allow President Donald Trump to penalize Chinese companies but could also choke off the fast-growing green energy industry in the U.S.

The U.S. International Trade Commission voted to uphold a complaint brought by two domestic solar manufacturers that complained that the low-cost imports had damaged their businesses. The decision was opposed by the much larger U.S. solar installation industry, which has seen the influx of the cheap panels spark a boom in construction of giant solar farms and rooftop systems around the country.

The issue will give Trump the opportunity to erect trade barriers he has hailed as key to his strategy to revive domestic manufacturing, and at the same time hit the Chinese companies that have largely evaded previous U.S. import penalties to become the leading suppliers of solar cells and panels. Administration officials say the trade case hasn’t been a central one for the president, but they are increasingly confident Trump will favor tariffs when the commission sends the White House its recommendations in the next couple of months.

In a statement, the White House said Trump would make a decision that “reflects the best interests of the United States,” and it praised the solar-makers, saying the domestic “solar manufacturing sector contributes to our energy security and economic prosperity.”

The case could also give Trump a platform to advance his “America First” agenda and tout his effort to revive the ailing coal sector. Coal companies have complained that the Obama administration waged a regulation-heavy “war on coal” while tilting federal tax incentives and loans to renewable energy sources in order to advance climate change policies.

“[Trump] could easily reward his buddies in the coal industry who would really like to see high-priced solar panels competing with coal for space on the grid,” said Clark Packard, a policy analyst and trade lawyer with the conservative think tank R Street Institute, which opposes tariffs. He added: “He may just want to stick it to people — your coastal elites who never would have voted for him who are more likely to use solar panels. He’s looking for any circumstance to impose tariffs, it doesn’t seem he cares what they are.”

Trump has not weighed in on the case so far, though his administration has reopened the landmark North American Free Trade Agreement with Mexico and China, and he has regularly blasted China and other countries for what he calls unfair trade with the U.S.

“He’s a protectionist, there’s no doubt about it, and he’s not very sympathetic to the renewable energy,” Gary Hufbauer, senior fellow for the Peterson Institute of International Economics. “As much as you can predict any president, I think his conclusion is foregone.”

The complaint brought by Georgia-based Suniva and Oregon-based SolarWorld USA has brought sharp opposition from most of the U.S. solar industry, which has seen its growth skyrocket as costs for the technology fell to a fraction of what they were a decade ago. Aided by federal tax incentives and state-level programs, large solar power installations have sprung up across the country, driving down costs for those plants to levels that are now competitive with coal and natural gas power power stations. That’s lifted employment in the sector to 260,000 even as the number of U.S. companies that make solar cells and panels sinks.

The solar industry has warned that high tariffs would eliminate 88,000 U.S. jobs by boosting costs and making many projects uneconomic just as the industry, which generates $29 billion in revenue, was starting to stand on its own.

“If companies are going to be injured, we’re going to be bringing in employees who will lose their jobs, mayors and governors and senators and representatives,” said Abigail Ross Hopper, head of the Solar Energy Industries Association. “We’re going to be making sure folks understand the impact, and putting a human face to it.”

The four members of the ITC will now begin to formulate a remedy to address the injury suffered by the U.S. manufacturers, and they will take recommendations from solar companies. Any remedies taken by the U.S. will not apply to imports from Canada.

Suniva brought the case under Section 201 of the Trade Act, a rarely used but powerful tool that gives the president the ultimate authority to take or discard the recommendations of the commission. Most trade complaints — including two solar cases acted upon by the Obama administration — are limited to imports from specific countries, but Section 201 allows the president to impose tariffs on all imports of a product. The authority was last used by President George W. Bush in 2002 to implemented a tariff on imported steel, but it was withdrawn 15 months later.

The commission will hold hearings on potential remedies on Oct. 3 and send its recommendations to the White House by Nov. 13.

Unlike trade complaints that allege foreign companies had unfair advantages because of subsidies in their home countries or that companies were “dumping” products at below-market prices to squeeze out competitors, a case brought under Section 201 needs only to show that imports were harming the domestic industry. That lower standard appears to have been met by data showing imports from Asian countries surging as some 30 companies in the U.S. shuttered their manufacturing plants.

While solar manufacturers in China ship about 20 percent of the equipment that is imported in the U.S., many Chinese companies have moved production to countries like Malaysia or Vietnam to avoid trade penalties imposed during the Obama administration.

Suniva, which lodged the original complaint and filed for bankruptcy protection earlier this year, has said that putting tariffs or setting a floor price for imported solar equipment would generate new manufacturing jobs in the U.S.

“President Trump can remedy the industry’s injury with relief that ensures U.S. energy dominance that includes a healthy U.S. solar ecosystem and prevents China and its proxies from owning the sun,” Suniva, which is itself majority owned by a Chinese company, Shunfeng International, said ahead of Friday’s decision.

The company has recommended a remedy that would set a price floor of 78 cents per watt, as well as a tariff that starts at 40 cents per watt and declines over four years — proposals that would more than double the current panel costs. Analysts have said that could erase five years of cost declines made by the industry.

“We are confident there is a way to strengthen and save U.S. solar manufacturing without harming the strong growth that has made America such a powerful market for solar products,” said Timothy Brightbill, an attorney at Wiley Rein who is representing SolarWorld. That company is a unit of Germany’s SolarWorld Industries GMBH, which has also filed for bankruptcy in its home country.

Several lawmakers and governors had urged the commission to reject the trade complaint, including in a letter sent Thursday by Govs. Brian Sandoval of Nevada; John Hickenlooper of Colorado; Charles Baker of Massachusetts; and Roy Cooper of North Carolina.

“At a time when our citizens are demanding more clean energy, the tariff could cause America to lose out on 47 gigawatts of solar installations, representing billions of dollars of infrastructure investment in our states,” they wrote to ITC Chairman Rhonda Schmidtlein.

A bipartisan group of 16 senators sent a letter last month to the ITC asking it to “carefully consider the negative impact” of an injury finding. Those lawmakers included Sens. Johnny Isakson of Georgia and Jerry Moran of Kansas, both Republicans, along with coastal Democrats like Massachusetts Sen. Ed Markey.

Conservative groups that support free trade have also opposed erecting the trade barriers. Earlier this month, a group of six conservative organizations, including the R Street Institute, the American Legislative Exchange Council and the National Taxpayers Union, published an open letter arguing against tariffs. The conservative Heritage Foundation, which was not on the letter, also opposes a policy of tariffs and has been tracking the Suniva case closely.

“We believe that policies that pick winners and losers by imposing tariffs are bad, pretty much no matter what they are,” said Tori Whiting, a research associate at theCenter for International Trade and Economics at Heritage.

Suniva and SolarWorld are not without their own defenders: Sen. Ron Wyden (D-Ore.) and two members of the Washington House delegation sent a letter of their own in favor of the tariffs, and House members from Georgia and Michigan have both backed the petition. The groups have also been backed by steel manufacturers.