The U.S. International Trade Commission (ITC) found on
Friday “that low-cost, imported solar panels from China and other countries
have hurt two domestic manufacturers. They are Georgia-based Suniva and
Oregon-based SolarWorld.” [1] It is anticipated that the ITC will “hold a
public hearing on October 3 as it considers potential remedies to help the
manufacturers. Those remedies could include levying tariffs on panels imported
from other countries. The commission will then forward those recommendations to”
President “Trump in November,” and he will “have 60 days after that to decide
what to do.”
Not everyone in the solar industry is happy with this
outcome. As Fortune puts it,
“The issue has split the solar industry. On one side are a
few solar manufacturers like Suniva and SolarWorld that say low-cost imports
have made it impossible to be profitable. On the other side is the U.S. solar
installation industry, which has benefited from low-cost panels that have led
to explosive growth in rooftop systems on homes and commercial buildings as
well as massive solar farms.” [2]
So it’s manufacturers versus installers. If you’re neither
of those, whose side should you be on? Here are some things to consider:
First of all, we have to make things. This is not only
because manufacturing jobs tend to pay better in the United States, but also
because those who do make things can, at any time, withhold them from those who
do not. It’s a matter of national security. Thus, Alexander Hamilton did not
scruple to encourage the use of protective duties on articles coming into the
United States, saying in his Report on
Manufacturers that duties “wear a beneficent aspect towards the
manufacturers of the country.” [3]
Hamilton’s ideas were developed by Henry Clay, who proposed
what he called the “American System,” which consisted of these features:
“• Support for a high tariff to protect
American industries and generate revenue for the federal government
“• Maintenance of high public land
prices to generate federal revenue
“• Preservation of the Bank of the
United States to stabilize the currency and rein in risky state and local banks
“• Development of a system of internal
improvements (such as roads and canals) which would knit the nation together
and be financed by the tariff and land sales revenues.” [4]
“Henry Clay’s ‘American System,’ devised in the burst of
nationalism that followed the War of 1812, remains one of the most historically
significant examples of a government-sponsored program to harmonize and balance
the nation's agriculture, commerce, and industry. This ‘System’ consisted of
three mutually reinforcing [sic]
parts: a tariff to protect and promote American industry; a national bank to
foster commerce; and federal subsidies for roads, canals, and other ‘internal
improvements’ to develop profitable markets for agriculture.” [5]
The American System was “implemented under Clay’s disciple and admirer Abraham
Lincoln and his successors during the period between the 1860s and the 1940s,
when the US became the planet’s leading manufacturing economy behind a high
wall of tariffs.” [6]
All of this is mentioned in anticipation of those who would
equate laissez faire capitalism with the founding of the Republic. It is simply
not the case. The “free trade” dogmatism that we witness today came much later.
So someone calling for protective tariffs should not, for that reason, have his
patriotism called into question.
But there is a legitimate criticism which points out that
tariffs can lead to higher prices in the domestic market. Solar panels
manufactured in the United States are likely to cost more than those made in
China simply because of the relative labor costs, if for no other reason. To
this concern your humble servant can do no better than cite to a speech of
William McKinley, who said this during a speech in Boston in 1882:
“Under free trade the trader is the master and the producer
the slave. Protection is but the law of nature, the law of self-preservation,
of self-development, of securing the highest and best destiny of the race of
man. [It is said] that protection is immoral.... Why, if protection builds up
and elevates 63,000,000 [the U.S. population] of people, the influence of those
63,000,000 of people elevates the rest of the world. We cannot take a step in
the pathway of progress without benefiting mankind everywhere. Well, they say, ‘Buy
where you can buy the cheapest’.... Of course, that applies to labor as to
everything else. Let me give you a maxim that is a thousand times better than
that, and it is the protection maxim: ‘Buy where you can pay the easiest.’ And
that spot of earth is where labor wins its highest rewards.” [7]
A company that pays cheap wages creates a situation in which
its competitors have to pay cheap wages as well in order to compete. But when
every company starts paying cheap wages, the number of items sold goes down.
That is because the more people there are receiving cheap wages, the fewer
number of people there will be who can afford the items manufactured. The economic
system ends up getting sucked into the vacuum created by the cheap wages.
Of course, we can’t treat the solar panel installers as if
they didn’t exist. Even if it was demonstrable that the total number of jobs
gained through protective measures would exceed the number lost, we can’t
reduce human beings to statistics. Or we shouldn’t do that anyway.
The fact remains, however, that we need to have things
manufactured in the United States. We cannot afford the dependency that would
follow if we did not. But American manufacturers are at a distinct disadvantage
in relation to countries like China when it comes to labor costs. The only
alternative is to level the playing field with tariffs, since lowering American
wages to China levels would adversely impact our overall standard of living.
This is not to say that we should leave the installers
without options. Right now, American governments do far too little in the area
of finding people work. We hear a lot of complaints about how many people are
on welfare and food stamps, but there seems to be less interest in making sure
that people have work. If it does turn out that protective measures enacted to
protect the American solar panel manufacturers cause harm to the installers, resulting
in layoffs, giving those laid off the right of first refusal for job openings
with the manufacturers might well be something to consider.
This would include requiring the manufacturers to bear the
burden of any necessary training. If the country steps in to help the
manufacturers, it would be fair to ask the manufacturers to help the country.
We need to relearn the necessity of a strong manufacturing
base in the United States, and we need to remove incentives for manufacturers
to relocate their facilities to countries where there is cheap labor. At the
same time we should be mindful that we have been moving to a service economy
for some time, and we must take steps to ensure that people employed in that
sector are not harmed in the process of transitioning back.
