SOLAR STARTS TRADE WAR OR U.S. BOOM

WTO Politics Target Chinese Manufacturers
Laura DiMugno, 13 January 2011 (Solar Industry)

"A bill containing a provision that has the potential to dramatically impact the U.S. solar supply chain - particularly module manufacturing - has been signed into law by President Obama…The National Defense Authorization Act for Fiscal Year 2011 (H.R.5136)…contains an amendment…requiring that solar photovoltaic modules purchased by the Department of Defense (DOD) through subcontracts - including Energy Savings Performance Contracts, land leases and utility service contracts - be produced either in the U.S. or in countries that are signatories of the World Trade Organization (WTO) Government Procurement Agreement.

"…[The amendment] was added to the bill when the House voted on it last May, and builds upon the Buy American Act. A component of the American Recovery and Reinvestment Act, the Buy American provision originally applied to the importation of steel…The House version of the bill contained this provision…whereas the Senate version did not, and the reconciliation bill tied the Buy American provision to actions conducted through the WTO."

click to enlarge

"Under the new provision, the DOD can only buy PV modules manufactured in countries that have signed the WTO side agreement…[and] China has not signed…[WTO side-agreement signatories are not punished with the same restrictions]…Trade relations between the U.S. and China took a beating last month when the U.S. accused China of violating WTO rules by providing unfair subsidies to Chinese wind power manufacturers, so it is clear that renewable energy is a high priority when it comes to Sino-American trade relations.

"Considering the DOD is the largest government purchaser of solar panels and that China supplies more solar modules to the U.S. than any other country, the enacted provision has obvious implications not only for Sino-American trade relations, but also for U.S. solar manufacturing business…Chinese companies supply over half of the solar panels used in the U.S., led by giants such as JA Solar and Yingli Solar…"

click to enlarge

"…[O]ther government agencies and contractors may face pressure to adopt Buy American provisions of their own. In addition, some solar developers - in an effort to be patriotic and support U.S.-based employment - may opt against importing Chinese modules…These actions, in turn, may prompt Chinese manufacturers to set up production facilities in the U.S. and to form joint ventures with American companies…[but] it will be difficult for these companies to compete with the low costs of labor offered in China.

"German manufacturer SolarWorld has already expanded its production facilities by adding factories in Camarillo, Calif., and Hillsboro, Ore. China may win when it comes to labor expenses, but the U.S. offers its own advantages for solar module manufacturing, including a highly silicon-savvy workforce…[T]he Buy American provision is not exclusively motivated by trade politics and is aimed, to some degree, at spurring manufacturing job creation in the U.S…"