Solar trade case weighs whether protection will save or sink industry

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Two solar manufacturers are begging the federal government for help, arguing that without protection from a flood of cheap imports, the United States risks losing its own domestic solar industry. But as they made their arguments before a commission on Tuesday, they faced an opponent: much of the rest of their industry.

In a hushed, wood-paneled hearing room in the heart of Washington, D.C., companies Suniva and SolarWorld urged the United States International Trade Commission to impose steep tariffs on imports of solar cells and modules, which are assembled into panels and used to harvest solar energy, under a rarely used section of U.S. trade law known as 201.

“Quite simply, we need the commission’s help to save solar manufacturing in the United States,” Jurgen Stein, CEO of SolarWorld Americas, said in testimony before the commission. “Relief under Section 201 is our last hope.”

But opponents argue the higher prices that would result from such a measure could cause far more disruption to the U.S. economy. As the price of solar products rises, fewer households and companies will be able to afford to install solar panels, costing jobs in the related industries that install, maintain and manufacture support structures for solar panels. Higher prices could also affect the companies that buy and sell the energy produced by these cheap solar projects, including utilities and big retailers.

Opponents say these industries employ far more people than upstream manufacturing. Representatives of many of these groups gathered at the hearing on Tuesday.

If the case continues, the decision will ultimately fall to President Donald Trump. As the Trump administration considers a range of measures to protect American industry, the conflict over solar shows the complicated trade-offs of government intervention in the market, where a measure can create winners and losers even in the same industry.

Howard Watkis, a 20-year-old solar installer in Elkridge, Maryland, was one of the workers that the Solar Energy Industries Association, the industry’s largest lobbying group, helped bring to the hearings.

Watkis said he enjoys his work far more than previous jobs he held stocking shoes at a retail store and shipping packages at UPS. He likes that his work helps to keep the planet clean - as well as his $18 an hour wage, which is helping him toward his goal of buying a house before he’s 25 years old.

“I just really hope everything goes well and I get to keep my job,” said Watkis, who wore a blue button reading “No new solar tariffs.” “If the prices go up, I could see us slowing up.”

Suniva and SolarWorld have asked the United States to set a minimum price for imports of solar cells and modules that is more than double the current global average sales price for such products, according to research by Goldman Sachs.

Given that products imported from China account for about 60 percent of the solar installations in the United States, Goldman Sachs estimates that such a measure would substantially reduce demand and revenue in the U.S. industry, especially affecting U.S. companies that install residential solar panels, like Sunrun Inc., Vivint Solar Inc and SunPower Corporation.

The hearing on Tuesday was merely directed at determining whether the U.S. solar manufacturing industry is being harmed by imports, a decision the commission is required to make by Sept. 22.

If the commission rules that it is, it will provide a recommendation for action to President Trump no later than Nov. 13. The president will then have 60 days to decide whether relief is needed, and if so what kind.

The case will be a test of the president’s attitude toward tariffs, which typically help the targeted industry but can cause harm to downstream companies by raising prices along the supply chain.

Trump has frequently floated the idea of tariffs to protect other U.S. industries that have suffered from cheap Chinese imports, including steel, aluminum and semiconductors.

The administration was expected to release a decision by the end of June on whether to impose sweeping tariffs on steel imports, but that measure has been delayed due to pushback from steel-consuming industries in the United States that could see their prices rise.

Both steel and solar tariffs would be passed under sections of U.S. trade law that have not been used in years. Recent presidential administrations have preferred to bring cases against other countries as the World Trade Organization, an international body charged with legislating trade disputes. But the Trump administration has criticized the WTO for failing to adequately protect U.S. industry, expressing preference for unilateral action instead.

Tuesday’s Section 201 hearing on solar products is the first such case to be heard since George W. Bush used the measure in 2002 to impose tariffs on steel. That was ultimately struck down at the WTO - a fate which trade experts said could also await the 201 decision on solar.

Opponents of the solar tariffs say the case is unwarranted, and that the two companies in question have just made poor business decisions. They point to a thriving U.S. industry, where solar installations nearly doubled last year.

Suniva and SolarWorld disagree. They claim that a deluge of imports from China has put scores of companies that make solar cells and modules out of business in the past five years - including Suniva, which filed for Chapter 11 bankruptcy and closed its doors earlier this year.

Solar is just one of many industries that have complained of a glut of capacity coming from China. U.S. companies say their Chinese counterparts receive unfair subsidies and support from their government. That allows Chinese companies to keep pumping out products even when global prices fall to a level where American companies can’t produce profitably.

The case is unusual, in that both sides have connections with China. The China Chamber of Commerce for Import and Export of Machinery and Electronic Products has petitioned against the tariffs. Suniva, which is based in Georgia, is majority owned by a Chinese company, Shunfeng International Clean Energy.

SolarWorld first brought a trade case complaining about China’s practices in 2011, which it won. When Chinese companies moved manufacturing to Taiwan to evade these restrictions, SolarWorld brought a case against Taiwan, and won that too.

But now, Chinese overcapacity is being routed through other countries like Malaysia, Thailand and Vietnam, SolarWorld and Suniva say. So the companies are arguing for a tariff that would apply broadly to imports - otherwise the Chinese will continue to play “Whac-a-Mole,” routing their solar capacity around the globe to avoid U.S. restrictions, they say.

Matt Card, the executive vice president of commercial operations at Suniva Inc., described the situation as “an insane race to the bottom” in which prices have reached “irrational lows.”

“This is an action of last resort,” he said. “We are in grave danger of extinction.”

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