Trump Can Prove His Business Savvy By Rejecting Solar Tariffs

01/12/2018 06:17 am ET
National Renewable Energy Laboratory

By Jan. 26, President Trump must decide whether to impose yet more tariffs on Chinese solar panels and cell manufacturers as recommended by the US International Trade Commission.

The question is why would Trump ignore his "America First" mantra by rooting for two foreign firms that have established themselves as losers in the US market? For one of the firms - German-owned SolarWorld Industries America - this is the third time they've come begging Washington after playing this game before during the Obama Administration.

In Oct. 2011, SolarWorld complained to both the US International Trade Commission and the US Department of Commerce under the 1974 Trade Act accusing China of dumping under-priced solar panels in the United States. That case was spearheaded by the Coalition for American Solar Manufacturing, most of who's 7 members had remained anonymous.

This was after SolarWorld received an $82.2 million clean energy manufacturing tax credit to expand its Oregon manufacturing plant in Jan. 2010.

The US Commerce Department issued the tariffs on Chinese solar cells and modules in 2012.

But this was when President Obama was heading into a second term election and Republican presidential opponents were making failed solar projects a 2012 election issue.

In an ironic double-standard, after the US pursued tariffs against China in 2012, it approached the World Trade Organization in 2013 alleging India was discriminating against the US through their mandatory local purchase requirements, causing US solar exports to India to fall by 90%.

The US continues to pursue that case against India before the WTO to force the country to allow free entry for US solar products. In response, India is now considering imposing steep temporary tariffs on all imported solar cells.

Obama's tariffs didn't help SolarWorld and by June 2013, the failing panel maker could not even get investors to show up to negotiate the restructuring its outstanding debt after losing $50 million in fiscal year 2012.

SolarWorld came back to the trough in 2014 asking for more tariffs, complaining that Chinese manufacturers had moved solar cell production to Taiwan, which was not covered under the 2012 tariffs.

That year, SolarWorld also got a $4 million grant from the US the Department of Energy.

Despite the multiple tariffs to slow Chinese solar panels and the Obama Administration giving SolarWorld a total of over $100 million in subsidies, the German firm still could not compete.

Deja Vu

Fast-forward to April 26, 2017, and this time around it was Suniva - owned by China-based Shunfeng International Clean Energy - that petitioned the US International Trade Commission for tariffs after declaring bankruptcy, laying off over 200 employees, and closing its solar module plants in Georgia and Michigan.

This despite Suniva receiving a $5.7 million tax credit in 2010 and three federal grants worth $8.8 million from 2014 to 2016.

Not wanting to miss out, what was left of SolarWorld saw yet another chance at a bail-out and followed Suniva to the US International Trade Commission in May after its German parent declared insolvency.

In October 2017, ITC found in the favor of the two foreign firms and issued three possible recommendations, which included tariffs on silicon-based solar cells of up to 30%, and on solar panels from 10% to 35% - much less than what SolarWorld and Suniva had hoped for.

Earlier this month, ITC released a supplemental report requested by US Trade Representative Robert Lighthizer that conveniently includes language needed to convince the World Trade Organization the tariffs are legal if they are challenged by China, which is the sort of case the US has never won.

Now its up to President Trump to decide how tough to be on imported solar components.

But that's not really what these two solar firms are looking for.

Suniva's trade case was supported by SQN Capital Management, the investment firm they now owe $52 million. If Trump approves the tariffs, SQN benefits from any increase in the company’s value when the company is sold. In fact, SQN wrote to the Chinese Chamber of Commerce in May 2017 - a month after filing the ITC petition - offering to drop the case if they found a buyer.

Meanwhile, SolarWorld, which received $6 million in emergency cash from lenders shortly after laying off 360 workers, is expecting final bids for its sale to come after Trump announces his decision.

Trump is no stranger to bankruptcy, so one would think that Trump the businessman would clearly see that these bankrupt firms are only seeking tariffs because it would prop up the value of their sale price.

Trump might want to consider that it's possible SolarWorld and Suniva simply hadn't factored into their business plans that the price of panels have been dropping exponentially without any government help.

Or, maybe it has something to do with scale: China now accounts for around 60% of global solar cell production, according to a new report from the Institute for Energy Economics and Financial Analysis.

Or, maybe the market had spoken and determined that SolarWorld and Suniva were making junk.

Despite president Trump's protectionist stance against China, Trump the businessman must know that as any industry continues to grow, it naturally pushes prices down - with or without China.

What Trump may not know is that American solar panel manufacturing can't keep up with American demand from not just homeowners, but utility-scale solar projects.

In fact, the argument that the tariffs would save American solar manufacturing jobs does not hold up: In 2016, 87 percent of US solar installations used foreign-made panels. And most of the more than 260,000 Americans who work in the solar industry are panel installers, with panel manufacturing accounting for only 15%, according to the Solar Energy Industries Association.

If Trump wants to build a border wall with solar panels, where does he think the panels are going to come from?

Well, maybe Florida.

The state of Florida and the City of Jacksonville are considering offering $54 million in local and state incentives to "Project Volt" to build a state-of-the-art US headquarters and solar manufacturing plant. Legislation to approve the project is being fast-tracked through the Jacksonville city council.

Ironically, "Project Volt" is rumored to be China's JinkoSolar, which maintains about a 10% global share of solar panel shipments, ranking number one in the European market, number two in China and Japan, and number four in the US.

Yep, we're gong to put tariffs on Chinese solar panels while the Chinese come to Florida to build Chinese solar panels with the help of US tax incentives.

Ironically, the tax bill Trump signed into law Dec. 22 continues the solar investment tax credit schedule through the end of 2021.

It's Trump's Call

Trump has total discretion as to whether to accept ITC's recommendations or reject the call for tariffs as nothing more than a slick financial maneuver by two failing foreign firms.

Trump should consider that with the ITC made up of Obama Administration holdovers - including Chairman Rhonda Schmidtlein, their "recommendations" for tariffs may have more to do with justifying past failed tariff programs than with the reality of the American solar market.

Embracing the ill-advised 2012 Obama Administration tariff decision – and another solar trade war - to help the same foreign firm that has previously led several trade cases against Chinese solar manufacturers in the US and Europe and still failed to financially survive doesn't sound like a move Trump the businessman would make.

Trump should be asking why is it both these firms continue to fail even with past government help while California’s Solaria Corporation just announced it has raised $23 million for expansion of its solar panel production?

In fact, total global corporate funding for solar came to $12.8 billion in 2017, a 41% increase over the $9.1 billion raised in 2016, according to Mercom Capital Group.

Actually, Trump's "America First" mantra gives him the perfect out to reject any solar tariffs since calling these two firms "American" manufactures would be like classifying Toyota as an "American" auto maker just because it has factories in Mississippi, Kentucky and Indiana.

In this case, President Trump needs to stop listening to his amateur advisers who have their own personal political agendas and return to thinking like Trump the businessman.

What would he do if one of his businesses couldn't compete in the real world: Suck it up and move on, or keep running back to the government for any handout he could get?

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