Pentagon Must “Buy American,” Not Chinese Solar Panels, 01/10/11

The NYTimes reports China is disturbed that the Pentagon, a rapidly growing consumer of renewable energy products – in insisting on buying solar panels made here – is interfering with world trade. That in spite of China’s pervasive export subsidies and local content requirements.

China has subsidized their solar panel manufacturing industry, something the U.S. is loathe to do. Our policy has been to subsidize consumers and let them choose in the “free market.” But, the price advantage to Chinese panels gives them an almost insurmountable advantage. The result: today, China produces half the worlds solar panels and exports 96% of them to Germany and the U.S.

The result of the Buy American provision in the defense appropriations section of the 2009 stimulus legislation is that Chinese manufacturers, and others, will be encouraged to establish manufacturing production in the U.S.

Of course, this restriction can and will be challenged under WTO free trade rules. The U.S. would be wise to look at additional barriers to protect this nascent industry for future U.S. jobs. Something else that could be considered is to restrict the protection of a U.S. Patent to products with minimum manufacturing value-added here.