President Obama has failed to counter China’s mercantilist trade war that has hollowed out the U.S. economy. Ironically, the bankruptcy of Solyndra, Obama’s iconic symbol of the green jobs revolution, is one more result of that failure.
Solyndra manufactured solar panels. It was heralded by Obama. Nearly half a billion taxpayer dollars were pumped into Solyndra to “create thousands of jobs”. The company, the money, and the jobs are gone.
Obama’s critics point to this failure as an indication of the larger failure of government directed and funded industrial policy and a stark contrast to the Reagan Recovery of the 1980s which was led by private investment in a free market encouraged by tax cuts and supportive government policies.
The critics are right but Solyndra was also bankrupted by Obama’s failure to counter China’s mercantilist trade policies.
Mercantilism is the nationalist economic policy built on an undervalued currency and exploited labor that maximizes exports and minimizes imports, uses all of its natural resources within the country, amasses gold and silver, imports where it must only raw materials, exporting higher value manufactured goods, and pirates high technology ignoring foreign patents and copyright.
In the mercantilist zero sum world, your country’s prosperity depends on reducing the wealth of your “trading partners”.
Europe evolved out of mercantilism and into free markets and free trade economic models designed to benefit every trading partner 150 years ago. China has resurrected mercantilism and the West and particularly the U.S. has not yet understood the danger.
Take the example of solar panel manufacturing.
Even though the world market for solar panels doubled from 2009 to 2010 and expanded another 44% in 2011, Solyndra and five other U.S. solar panel makers went bankrupt and at least six other American solar manufacturing companies suffered layoffs and plant shutdowns over the past two years.
During the same time, China’s photovoltaic (PV) solar manufacturing companies, led by Suntech, the world’s largest solar panel maker, have captured more than 55% of the world market. How? It’s not what you think. The Chinese in this case do not have an edge in labor or material costs.
Obama provided loan guarantees to Solyndra and other manufacturers as well as direct “stimulus” grants to installations of wind and solar power. But the Chinese Government goes much further to build and support their companies when they decide to dominate a product.
A report released on February 7 from the National Renewable Energy Laboratory entitled “Solar PV Manufacturing Cost Analysis: U.S. Competitiveness in a Global Industry” documents that Chinese solar panel production actually costs more in labor and materials than American production for the American market when the cost of shipping from China is included.
The report documents that the much cheaper imported Chinese solar panels that are driving domestic makers out of business are in fact heavily and directly subsidized by the Chinese Government to achieve that exact effect.
The practice is known as “dumping”. It is anti-free trade and outlawed by international trade agreements that China has signed. Chinese solar panel dumping is documented in a petition filed last year by American solar company SolarWorld representing 150 solar panel makers and over 14,000 workers with the International Trade Commission of the U.S. Commerce Department.
Opponents of this petition include 132 U.S. companies representing 13,000 jobs importing, selling, or installing the cheaper Chinese panels.
Obama has the power under international trade agreements to grant the petition and levy countervailing import duties on imported Chinese solar panels to level the playing field before it is too late and the U.S. solar manufacturing companies go the way of U.S. TV manufacturing.
Will Obama act? Not likely.
Since the beginning of his term, Obama has responded to Chinese aggression with passivity, even removing an American aircraft carrier farther out to sea when the Chinese objected to its transit in international waters.
Bowing to Chinese leaders, giving those leaders red carpet welcomes to Washington, speaking with admiration and envy of the ability of the Chinese Communist Party to maintain a one party state in a growing economy, Obama has been Beijing’s best friend while China systematically disassembled American manufacturing.
Many within and outside Obama’s administration charge that taking action against Chinese dumping would provoke a “trade war”. The Chinese are already engaged in a trade war and the U.S. is losing.
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