U.S. Solar-Panel Spat With China Makes Canada's Leader Popular in Beijing

 | Dec 04, 2017 | 11:00 AM EST
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Canadian Prime Minister Justin Trudeau arrived in Beijing on Sunday for a state visit, not long after Donald Trump trod the same red carpet.

Their stances while on that carpet, when it comes to free trade, could not be more different.

Canada, of course, remains very much a part of the Trans-Pacific Partnership that the United States deserted. And Trudeau is expected to bring up how to increase free trade when he meets with Chinese President Xi Jinping.

"Canada Is Back!" Trudeau declared on his election two years ago. It looks like it will step into the void that the United States is creating as it is withdrawing from the global economy to as great an extent as possible.

Trudeau is pushing for expanded Canadian participation in international trade deals, and Canada is currently negotiating individual deals with India, Japan and Singapore as well. Most significant to date, its trade deal with the European Union went into effect in September. 

We have a pretty good idea what Trump thinks of the European Union. He wants nothing to do with it.

Trump came to Asia for the first half of November, the longest trip by a sitting U.S. president in more than a quarter of a century. Needless to say, it was a curious visit.

The U.S. president appears to be developing a personal rapport with Japanese Prime Minister Shinzo Abe and Chinese President Xi Jinping. All three men like to paint themselves as staunch nationalists who take tough stances when they need to.

Trump then attended the summit of the 21 heads of state who gathered at the APEC summit in Danang, Vietnam, largely in order to promote free trade, APEC's core mandate.

He decided to make his address to the 21 leaders a pointed rejection of multinational trade agreements, while attending an event designed to encourage multinational trade agreements. He said he didn't agree with such things -- he has previously called "every" trade deal the United States has ever signed "disastrous" -- and that all nations should beat a path to Washington's door to beg for a one-on-one, one-sided negotiation.

To be honest, they just won't bother. Why should they? There's plenty of business to be done just within Asia, home to the second- and third-biggest economies in the world, in the form of China and Japan.

The TPP's 11 members, minus the United States, still represent $12.4 trillion in in GDP. That's around 16% of the global total. The figure would have been 38% with the United States, but is impressive nevertheless. It is not that far from the 28-member European Union, which in 2016 was estimated to have had a GDP of 14.8 trillion euros ($17.5 trillion).

The United States is perfectly willing to fight for industries that no longer deserve saving, to protect industries that simply can't stand on their own two feet.

For instance, it looks like the United States is gearing up to protect, against all the odds, U.S. producers of solar panels. Chinese companies now make around two-thirds of the world's panels, an industry that U.S. companies once dominated.

The technology is easy to learn and cheap to deploy. Chinese companies, with cheap labor and land, can simply make them much more efficiently than American ones. The huge boom in Chinese production has pushed down prices by almost 90% in the last decade.

U.S. trade officials now want to take the Chinese companies to task because, American companies claim, their competitors get unfair state subsidies and cheap loans from state-owned Chinese banks.

This ignores the fact that most Chinese solar-panel makers are private companies rather than state-owned. The domestic Chinese solar industry has been through massive pain, with a Shanghai-based solar-power company, Shanghai Chaori Solar, the first Chinese company in history to default on one of its bonds.

In fact, there were around 800 solar-panel makers in China a decade ago, when China began its huge production push. There are only around 80 now.

If China has been unfairly supporting its own solar-power companies, it has been doing a dismal job of it.

They may be getting some subsidies, but U.S. companies also benefit from hefty government "encouragement." The Fremont, Calif.-based solar-equipment maker Solyndra received a $535 million loan guarantee from the U.S. Department of Energy, and a $25 million tax break from the state of California. And it still went bust.

I'm sorry, if someone else is able to make your product 90% cheaper than you can do it, well, you better do something else. You can harp and complain and whine all you want. But your product, unless 90% better in some way, simply isn't competitive.

The United States actually already imposed tougher sanctions on imports of solar panels from Chinese manufacturers. So the Chinese makers shifted their production to Southeast Asia. 

Two U.S. companies have now complained, officially, that they are uncompetitive. What they actually said, of course, is that their competitors get unfair help. The Trump administration will now decide on Jan. 26 whether to believe them, and apply those hefty duties globally.

Trump is likely to side with the two complaining companies, as The New York Times explains. Not only does this stance protect an uncompetitive industry, it also promotes unsustainable coal as an energy source. Does the United States still need as many jobs as it can get that involve men just digging stuff out of the ground? Has it not progressed past that point? 

If the United States does impose tough restrictions on global imports of the panels, I imagine there will be a thriving black market trade in black solar panels being smuggled in from Canada, Mexico and wherever anyone else can import them for less. 

Then there's the tricky point that it is actually good for all involved, American consumers included, to have cheap solar panels. They encourage the use of alternative energy. The Washington-based Solar Energy Industries Association is also protesting that American installers will lose U.S. jobs if the duties go in place.

If the United states imposes hefty tariffs on solar-panel imports, it is hurting the environment. It is also making life more expensive for both corporations that could benefit from cheap solar power and individuals who could make their own electricity at home, on the roof.

I'm sure Trudeau will be keen to encourage imports of Chinese solar panels to Ottawa and beyond. The Canadian government itself has pledged that by 2025, 100% of its electricity to power its buildings and operations should come from renewable energy.

And Trudeau will be there to champion free trade. Canada is, to be fair, at best a middleweight in economic terms. It's the world's 10th-largest economy, according to the World Bank, at $1.6 trillion -- slightly bigger than South Korea, slightly smaller than Brazil. It's less than one-tenth the size of the United States.

But multinational trade still needs its champions. It looks like it has one in Trudeau.

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