(What’s Left of) Our Economy: A Phony “Industry’s” Phony Case Against Solar Tariffs

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China, clean energy, Commerce Department, dumping, green energy, innovation, manufacturing, misinformation, renewable energy, solar energy, solar panels, Southeast Asia, subsidies, tariffs, trade law, transshipment, {What's Left of) Our Economy

What a disgraceful scandal a leader of America’s renewable energy industry just spotlighted! The main evidence presented for imposing steep tariffs on some imports of solar panels has been disavowed by a main source of that evidence!

Except the real scandal is the misinformation-y nature of this claim – which is becoming par for the course for certain supporters of a faster transition to a clean energy-dominated economy..

Let’s begin at the beginning. On March 28, the Commerce Department, one of two federal agencies responsible for administering the U.S. trade law system, agreed to investigate charges by a California-based manufacturer of panels that factories in Southeast Asia are being used by China to circumvent the tariffs that began to be imposed in 2012 on panels and key components made in the People’s Republic. The levies aimed to offset China’s practice of selling these panels at prices far below production costs not because of market forces, but because of subsidies for the manufacturers.

But tariffs to counter this predatory tactic, also called dumping, can sometimes be circumvented by two types of schemes that are also sanctionable by U.S. trade law. Under the first, called transshipment, the guilty parties send their finished goods to other foreign countries, where they’re re-labeled and sent off for final sale in America. Under the second, the guilty parties send the parts and components of finished products to factories in other foreign countries, where they’re assembled and then exported to the United States.

It’s the second practice that formed the basis for this latest circumvention allegation, and as standard in trade law cases, the lawyers for the U.S. plaintiff – a company called Auxin Solar – tried to persuade the Commerce Department to probe whether circumvention was occuring with a brief containing evidence they’d gathered. This is the request approved on March 28, and the investigation is still ongoing.

In an op-ed article yesterday afternoon, though, Gregory Wetstone of the American Council on Renewable Energy made a bombshell accusation. Writing in TheHill.com, Wetstone contended that the research company whose findings Auxin’s lawyers heavily relied on to prove their charges claimed that some of their key data had been used inaccurately.

The lawyers attempted to show circumvention by citing findings from the research firm BloombergNEF documenting that fully 70 percent of the value of the solar panels imported into the United States from some plants in Cambodia, Malaysia, Thailand, and Vietnam came from China. If true, this finding would strongly confirm Auxin’s position that the panels were little more than products sent in pieces from China to Southeast Asia, to be snapped together for shipment to the United States – that is, that the anti-China tariffs had indeed been circumvented.

But according to BloombergNEF, the 70 percent figure only referred to the “cash cost” of the panel inputs. Left out were the upfront capital costs of building the Southeast Asian factories themselves – which they argued made clear that these facilities performed the kind of genuine manufacturing of the imported materials that in turn absolved them of the circumvention charge. In trade law terms, the parts and components and other inputs supposedly underwent substantial transformation, and were not simply disassembled pieces of final products.

As should be clear to anyone familiar with manufacturing, though, the scale of the investment needed to build a factory has no intrinsic relationship to the nature of the work it performs. Moreover, it’s just as reasonable to view the upfront investment as a one-time cost required to launch a simple assembly operation aimed at lasting for many years. So the longer this ruse continues, the greater the importance of the cost of the panel inputs.  

At the same time, plaintiff Auxin’s case doesn’t rely solely or even mainly on reason, or on the 70 percent figure however it’s interpreted. It doesn’t even rely solely or even mainly on trade data showing that remarkably soon after the original tariffs were placed on the Chinese-made solar cells, Chinese shipments to the United States nosedived, and shipments from the four Southeast Asian countries began skyrocketing. Nor does it rely solely or significantly on additional trade data showing that these countries’ imports of Chinese-made solar panel parts, components, and materials have also soared, often exponentially, over the last decade.

Instead, the brief also presents abundant evidence — that’s never been challenged by the tariff opponents — that many of the new Southeast Asian factories exporting so many solar panels to the United States themselves are Chinese-built or -acquired, and therefore -owned. For example:

>”Jinko Solar Group is a producer of solar products, including silicon ingots, wafers, solar cells, and modules, with its production predominantly based in China. After imposition of the [anti-dumping tariffs] in 2015, Jinko Solar built a solar cell and module processing facility in Penang, Malaysia.”

>”JA Solar launched a solar cell processing facility in Penang, Malaysia in 2015. JA Solar produces ingots and wafers in its Chinese facilities. When the company first started exporting solar cells from Malaysia, the company stated that ‘raw materials such as silicon wafers were being imported from China . . . .’”

>”LONGi owns and operates a wholly owned facility in Malaysia. Li Zhenguo, President of Longi Green Tech, touted LONGi’s Malaysia factory as ‘mainly targeting the U.S. market,’ recognizing that ‘Chinese solar products are imposed by about 150% import tariffs by the U.S. {so} {i}t’s almost impossible for China-made products to be sold there.’”

>A company representative has stated that “Trina Solar supplies U.S. orders from Thailand (as opposed to from China). Additionally, the Chairman and CEO of Trina Solar stated that Trina Solar’s projects in the pan-Asia region align the company with the Chinese government’s ‘One Belt, One Road’ initiative.”

>Suzhou Talesun Solar Technology has directly cited the solar tariffs “as the reason for its Thai facility’s existence by stating that it ‘seized the chance to break through the U.S. market through Thai production capacity.’ Talesun’s company website markets its ability to circumvent the orders on CSPV cells and modules from China: ‘with our factories in China and Thailand, we offer a solution adapted to markets affected by anti-dumping laws such as the United States or Europe.’”

>LONGi Green Tech’s president “touted LONGi’s Vietnam factory as ‘mainly targeting the U.S. market,’ recognizing that shipments from China cannot compete based on existing tariffs.”

>”According to the company’s blog, one reason why Boviet’s [an affiliate of Chinese entity Boway] assembly is based out of Vietnam is because ‘Vietnam is not a U.S. listed Anti-dumping and Countervailing region. No tariffs influence Boviet’s U.S. business, and those cost-savings ultimately trickle down to the buyer.’ Boviet Solar also openly advertises that it sources glass for its solar modules from China.”

>”Chinese solar cell manufacturer ET Solar has reported that it was transferring 300 MW of cell capacity from China to be assembled in Cambodia, where it will also assemble modules to target the U.S. market.”

Somehow Hill op-ed author Wetstone and the alternative energy businesses he helps represent missed all of this. Not that anyone should be surprised. Because for many years they’ve been deceptively describing as the U.S. “solar energy industry” a sector that overwhelmingly consists of companies that install solar power systems for homes, businesses, and utilities.

Certainly they create American jobs and facilitate whatever clean energy transition is proceeding. But this sector generates little value or innovation or productivity growth for the U.S. economy. And it has about as much in common with solar manufacturers as nursing home operators have with the cutting-edge American pharmaceutical industry, or as taxi or ride-sharing companies have with U.S.automakers. Therefore, where the solar panels they stick on American roofs and emplace in lots and other vacant or cleared space are concerned, the cheaper the better, no matter where they come from — including China.

In other words, the U.S. “solar energy industry’s” case against tariffs on Southeast Asian panels fails not only on legal and factual grounds (because circumvention of the China levies is so clearly happening). It fails on policy grounds – except for those who don’t mind much of America’s clean energy future, and all the economic and technological and climate benefits it can create, being made by a hostile dictatorship. No wonder these companies and their leaders are so dependent on spreading misinformation to persuade Washington to lift the solar tariffs.

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Our So-Called Foreign Policy: Biden’s Foreign Policy Pillar is Looking Hollow at Best

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alliances, allies, Beijing Olympics, Biden, China, Emmanuel Macron, European Union, France, Fumio Kishida, Germany, Japan, multilateralism, NATO, Nordstream 2, North Atlantic treaty Organization, Olympic boycott, Our So-Called Foreign Policy, Putin, Russia, sanctions, Southeast Asia, Taiwan, Ukraine, United Kingdom, Winter Olympics

What’s worse than “terrible”? It’s an important question because if that’s a term that accurately describes President Biden’s last week or so in office, then something even stronger is clearly needed for the setbacks suffered recently by multilateralism – the foundation of his foreign policy. And most troublingly, the idea that U.S. foreign policy success requires the cooperation of major allies has been failing most conspicuously when it comes to dealing with America’s two biggest global rivals – Russia and China.

Let’s deal with Russia first, but not because I view it as the biggest threat to the United States – or even much of a threat at all. In fact, I’ve long and repeatedly written that the fate of Ukraine has no importance for America’s national security, and that Washington should accept some form of the kind of spheres of influence-type deal in Eastern Europe that Russian leader Vladimir Putin has proposed.

But the Ukraine crisis is making the most headlines right now, the subject dominated his long press conference last Wednesday, and Mr. Biden is nowhere near taking my advice. Indeed, that presser added powerfully to the evidence that the United States and its allies are deeply divided over how to respond to actual and possible Russian moves against Ukraine.

As the President made clear, “[I]t’s very important that we keep everyone in NATO on the same page.  And that’s what I’m spending a lot of time doing.  And there are differences.  There are differences in NATO as to what countries are willing to do depending on what happens — the degree to which they’re able to go.”

Indeed, that very day, France’s President Emmanuel Macron proposed that the European Union seek separate from U.S. efforts a new security agreement with Russia. Macron did state that “It is good that Europeans and the United States coordinate” but added “it is necessary that Europeans conduct their own dialogue, We must put together a joint proposal, a joint vision, a new security and stability order for Europe.”

Since Europe is a lot closer to Russia and Ukraine that the United States, and will be much more dramatically affected by events in that region, this French position seems entirely legitimate to me. At the same time, it’s tough to believe that Macron would place such importance on a Europe-only effort if he was completely happy with what he knows of American diplomacy so far.

Germany’s views seem even farther from Washington’s. Its new government has not only refused to join some other European countries (notably, the United Kingdom) in supplying defensive weapons to Ukraine. It’s blocked at least one NATO country – Estonia – from sending its own Made in Germany arms to bolster Kiev’s military.

Moreover, trade-dependent Germany, whose trade with Russia in energy and other goods is substantial, doesn’t even seem very keen on deterring or punishing Moscow for invading Ukraine with the kinds of sanctions that are widely viewed as the strongest – cutting Russia off from the global network used by almost all the world’s financial institutions to send money across borders for all the reasons that money is sent across borders. At least Berlin is sounding more open to halting final approval of the Nordstream 2 natural gas pipeline if Ukraine is invaded.    

Asian countries seem more prepared to resist aggression from China, especially the military kind (as opposed to Beijing’s economic efforts at intimidation). Since this post last September reporting on steps they’ve taken to transition from U.S. protectorates to countries more closely resembling genuine allies, some have made even more encouraging moves.

For example, Indonesia reportedly “is preparing itself militarily” to deal with Chinese moves against islands located in its territorial waters and major straits through which much of its (and the world’s commercial shipping) travels. The Philippines – another Southeast Asian country embroiled in maritimes disputes with China, has just bought cruise missiles from India, and reportedly some of its neighbors are interested in these devices, too.

At the same time, despite a virtual summit between President Biden and Japanese Prime Minister Fumio Kishida, Japan’s policy on using its forces to help any U.S. attempt to defend Taiwan from a Chinese attack remains ambivalent at best. South Korea looks more hesistant still.

Nor is Japan backing the United States to the hilt on sanctioning Russia economically following a Ukraine attack, or even close. After the Biden-Kishida session, an anonymous U.S. official said (in a briefing posted on the White House website) that although the Japanese leader “made it clear his country would be ‘fully behind’” Washington on the issue, his response concerning economic responses Tokyo would support was “We did not get into the specifics about possible steps that would be taken in the event that we see these [potential Russian] actions transpire.”

The refusal of so many U.S. allies and others to join the Biden administration’s diplomatic boycott versus the upcoming Winter Olympics in Beijing also casts major doubts on the President’s emphasis on multilateralism. Can any countries declining even to keep their officials alone out of China for the games (as opposed to their athletes) be counted on to push back more concretely and powerfully against future provocations from China?

Athletes and sports fans know well the expression “Change a losing game.”  For all you others, it means that if a strategy or approach is failing, switch to an alternative.  But for the future of American foreign policy, the most important part of it remains unspoken, and the one that the President needs most urgently to heed:  “Change it before you’ve lost.”   

 

Our So-Called Foreign Policy: Afghanistan and the Credibility Crock

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Afghanistan, Bay of Pigs, Biden, Central America, Cold War, communism, credibility, Cuba, Cuban Missile Crisis, Gideon Rachman, Grenada, John F. Kennedy, Laos, Lebanon, Lyndon B. Johnson, Our So-Called Foreign Policy, Reagan Doctrine, Richard M. Nixon, Ronald Reagan, Samuel Johnson, Southeast Asia, Soviet Union, Vietnam

Forgive me if this header makes it sound like I’m unusually ticked off. But I sort of am. Because I’ve been dealing for decades with the claim that the United States can’t set meaningful foreign policy priorities because tolerating any international setbacks of any kind would destroy its global credibility forever.

I haven’t heard this argument lately, no doubt because it’s rooted in the Cold War era, and the absence of a superpower adversary determined to engage in a full-fledged contest for global supremacy (and no, the Chinese aren’t there yet, especially when it comes to fighting proxy wars) drained it of lots of its…well…credibility as a rationale for sweeping American global activism.

Now, however, the seeming certainty of a Taliban takeover following the nearly completed U.S. military withdrawal from Afghanistan has brought it back (see, e.g., here and here), and it’s even less convincing than during its Cold War heyday.

As a review of U.S. Cold War history makes clear, there were actually several varieties of the credibility theory. For example, John F. Kennedy’s effort to halt the spread of Communism in Vietnam clearly was influenced by the acute need he felt to bolster his own credibility after the Bay of Pigs debacle, a performance at a summit with Soviet leader Nikita Khrushchev that he himself viewed as a dangerous flop, and a widely criticized diplomatic settlement to a conflict in neighboring Laos. In other words, Kennedy perceived an urgent need to salvage a reputation for simple foreign policy competence.

Credibility throughout the early Cold War decades in particular had an ideological dimension, too. As this study handily summarizes, U.S. leaders strongly believed that prevailing against the Soviets and Chinese required that Americans help threatened countries demonstrate to the world at large that non-Communist systems had the vigor to repel subversion and outright revolt by adherents of that creed. So establishing credibility during that period was also an exercise in global morale building. (Interestingly, echoes of this idea permeate the rhetoric of the Biden administration and other globalists on the subject of China.)

But the main version of Cold War credibility theory held any U.S. failure to resist Communist expansionism the world over would convince friend and foe alike that American declarations of resolve were shams and that American security commitments were worthless whenever push came to shove. The resulting shift in the global balance of power and influence, as U.S. allies and neutrals alike scrambled to accommodate ascendant Communist forces as best they could, would leave an internationally isolated America much weaker and poorer.

Such fears were behind Lyndon B. Johnson’s declaration that America would not “cut and run” from Vietnam because “We must meet our commitments in the world….”

They were behind Richard M. Nixon’s Vietnam-induced fear that “If, when the chips are down, the world’s most powerful nation, the United States of America, acts like a pitiful, helpless giant, the forces of totalitarianism and anarchy will threaten free nations and free institutions throughout the world.”

And they were explicitly behind Ronald Reagan’s case for his doctrine of resisting Moscow’s efforts to expand its influence in Central America, sub-Saharan Africa – and Afghanistan: “The U.S. must rebuild the credibility of its commitment to resist Soviet encroachment on U.S. interests and those of its Allies and friends, and to support effectively those Third World states that are willing to resist Soviet pressures or oppose Soviet initiatives hostile to the United States, or are special targets of Soviet policy.”

Thankfully, today’s credibility-mongers are outside of power in Washington, not inside. But these members of the globalist foreign policy Blob concentrated in the Mainstream Media, the think tank world, and some factions in Congress, are hardly devoid of influence, especially if the optics coming out of Afghanistan are ugly, as can be counted on. So it’s worth reviewing the main reasons that this form of obsessing about U.S. credibility has no claim to be taken seriously both for that reason, and because their fatal flaws remain the same, too.

In the first place, credibility-mongering falls on its face because its main animating fears have simply not materialized over any stretch of time. The fall of Vietnam, most prominently, clearly led to Communist takeovers in Laos and Cambodia, too. But in the immediate aftermath of Vietnam, no U.S. treaty allies defected into the Communist camp, or turned neutral. Even in Southeast Asia, no more dominoes topped – despite the clear lack of any American appetite to help with any resistance.

In fact, as (globalist) Financial Times columnist Gideon Rachman just noted, “within fourteen years of the fall of Saigon, the cold war was over, and the west had won.”

A least as interesting, as I noted way back in 1985, successful American demonstrations of credibility have displayed little long-term value. For example, Reagan’s 1983 invasion of Grenada was a clear-cut win for the United States. But for years afterwards, Soviet- and Cuban-backed leaders and insurgents in nearby Central America continued defying his administration’s will for years afterward. Outside the Western Hemisphere, the Grenada victory did nothing to stop deadly attacks on U.S. Marines stationed in civil war-torn Lebanon. Meanwhile, many American allies viewed Grenada as more evidence that Reagan was a dangerous cowboy. Even staunch Reagan ally and close personal friend Margaret Thatcher, the British Prime Minister, was unnerved.

More important, though, as I argued in that 1985 article, given inevitable limits on American power and will, the real measure of U.S. credibility isn’t a stated determination to respond strongly to every single foreign challenge that arises, or even to try doing so. In fact, because its post-Vietnam circumstances and behavior have made those limits obvious globally, such pretensions are likeliest to have the opposite effect – to fuel doubts about American judgment and wisdom.

Rather than depending on “convincing the rest of the world that the United States will respond to all instances of aggression,” I continued, building and preserving American credibility “must depend on convincing the world that the United States will respond to some instances of aggression” based on the identification of specific interests that are regarded as important enough to defend (or to advance, for that matter, when such opportunities appear). And operationally, “this translates into an ability to use finite assets efficiently and rationally – to convey a clear sense of priorities.”

Of course, adversaries might as a result view countries or regions left off an American definition of crucial interests as tempting targets. But precisely because these would be low priorities, by definition any adversary wins in these areas would pose few if any risks to the United States.

The 18^th century British literary giant Samuel Johnson famously proclaimed that false, cynical expressions of patriotism are “the last refuge of a scoundrel.” I wouldn’t go so far as to attach that label to the credibility-mongers. But resort to  this ploy too often has been the last refuge of globalists who are completely out of any other reasons to insist on dubious forms of international activism, and the current hysteria over Afghanistan is clearly the latest example.

Making News: Podcast of Last Night’s John Batchelor Show Appearance

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ASEAN, Asia, China, Gordon Chang, Making News, Obama, South China Sea, Southeast Asia, The John Batchelor Show

I’m pleased to present this link to the podcast of my appearance last night on John Batchelor’s nationally syndicated radio show.  Click it for a great debate between me and co-host Gordon Chang on whether President Obama’s summit this week with the leaders of ten Southeast Asian countries was a roaring success or a dismal failure.  The debate starts about halfway through this roughly 39-minute segment.