Archive for the ‘Cleantech’ Category

Will Countervailing and Anti-Dumping Duties Help or Hurt America’s Solar Industry?

Tuesday, July 24th, 2012

The answer to this question depends on what role you play in America’s solar industry ? manufacturer, distributor, or retail installer ? and what China will do in retaliation.

In May 2012, ChinaGlobalTrade.com, a program of non-profit organization The Kearny Alliance, released a well-researched and well-documented report titled “China’s Solar Industry and the U. S. Anti-Dumping/Anti-Subsidy Trade Case. The purpose of the report is to “present a balanced, fact-based discussion of the trade case; an exploration of how China’s solar industry has grown so big so fast; and a thorough analysis of what might be the consequences – many of them likely unintended – of likely outcomes of this trade case” to encourage readers to look at the issue from new angles.

As background to the case, the report presents these facts about the global solar industry:

  • On-grid installation of solar photovoltaic (PV) systems grew an average of 45 percent per year on average between 2003 and 2009, driven mainly by government policies in Germany, Spain, Italy, Japan, and the U.S. “These policies are designed, in one way or another, to subsidize the cost of solar power so that it is competitive with other on-grid electricity sources.”
  • Global production of solar PV systems rose dramatically in the last decade – from 371 megawatts in 2001 to more than 24 gigawatts in 2010, an increase of 6,376 percent.
  • The price of solar cells and modules started declining rapidly beginning in 2008 from about $3.30 per watt in 2008 to about $1.80 per watt at the beginning of 2011 and $1.00 per watt at the end of 2011. The price is projected to fall to $0.74 per watt by 2014.

During this time period, China’s growth in solar manufacturing was rapid. “In 2001 China produced 1 percent of the world’s solar cells and modules. By 2010 it produced nearly half. Today, four of the top 5 solar cell producers are Chinese; three of the five module producers are. Of the top fifteen solar cell manufacturers in 2010, six were Chinese companies. Two were American. Of the fifteen solar module manufacturers in 2010, eight were Chinese. One was American.”

Estimates of the cost advantage of Chinese cell and module manufacturers compared to their U.S. counterparts range from about 18 percent to 30 percent, but GTM Research analyst, Shyam Mehta, estimates the cost differential to be about 25 to 30 percent in 2012.

As a result of this loss in market share by American companies, in October 2011 an anti-dumping and anti-subsidy trade case was filed by SolarWorld Industries America, the U.S. division of German manufacturer SolarWorld AG, and six other U. S.-based solar manufacturers with the U. S. International Trade Commission and Department of Commerce to seek relief for U. S. producers injured by Chinese imports of crystalline silicon photovoltaic (CSPV) products.

The report says “the stakes are high. For one thing, countervailing (anti-subsidy) duties, if high enough, could dramatically affect the solar industry in the U.S. and around the world, as could anti-dumping tariffs. There are potentially severe unintended consequences of any policy action in this case – or inaction, for that matter.”

On March 20, 2012, U.S. Department of Commerce announced its preliminary determination in the countervailing duty (anti-subsidy) investigation. Chinese companies received preliminary countervailing duties ranging from a high of 4.73 percent for Trina Solar down to 2.90 percent for Suntech Power, with all other Chinese producers at 3.61 percent.

The report states that “Chinese reaction to the preliminary countervailing duties was relatively mild. Two Chinese trade groups asked the China Ministry of Commerce (MOC) to start an investigation against U.S. into dumping and illegal subsidies. However, the Chinese reaction to the May 17th preliminary anti-dumping determination, in which the Department of Commerce found that Chinese manufacturers dumped solar cells on the U. S. market and assessed tariffs of about 31 percent, was very different.

The report states that the reactions to this case could have significant ramifications for the global solar industry and presents several potential reactions by China.

  • China could remove its subsidies and stop dumping – the precedent for this is that when the U.S. Trade Representative (USTR) launched an investigation into export restraints, subsidies, and discrimination against foreign companies for imported goods by China in green technologies in October 2010, the pressure from the petition led China to remove local content requirements for wind technology.
  • Chinese manufacturers could retaliate in a number of ways against the imposed tariff, which is “why only three of the seven companies behind the petition have named themselves publicly (and two of those only after the preliminary countervailing duties were announced).”
  • Chinese manufacturers could ramp up their own production of polysilicon (which they have already begun doing) and turn to Germany and Switzerland to fill the equipment gap – effectively cutting out the U.S. firms that are still competitive in the solar supply chain.
  • Chinese firms could move cell manufacturing to Taiwan, which the authors of the report feel “could be their best solution because it would allow Chinese manufacturers to keep their upstream supply chains intact…Then, they could assemble the modules anywhere in the world ? in Taiwan, in China, in Mexico, or in the end-use country.”

According to Melanie Hart, Policy Analyst for Chinese Energy and Climate Policy at the Center for American Progress, “Retaliation can also spread beyond the actual petitioners to harm the U.S. economy more broadly.” China could block market access for U.S.-based firms in other cleantech industries.

Tom Zarrella, a former chief executive of GT Solar, a New Hampshire supplier of solar manufacturing equipment, said, “It would be a travesty for the solar industry.” The U.S. is still an important supplier of polysilicon, as well as CSPV manufacturing equipment.

In addition, Chinese solar manufacturers could ramp up production in the U.S. similar to how trade cases against Japanese automakers in the 1970s and 1980s pushed Japanese companies into building factories in the U.S. “Chinese solar manufacturer Canadian Solar already said that would be one possible response to countervailing duties and anti-dumping duties in this case too.”

However, this would not be a way for Chinese manufacturers to circumvent tariffs because the trade case applies to Chinese-made cells as well as modules comprised of Chinese-made cells, no matter where those modules are assembled. To avoid the tariffs, Chinese manufacturers would have to locate not just module assembly plants but cell production facilities in the United States as well.

The trade case “will only accelerate the setting up of solar module and solar cell manu-facturing in the United States,” said the president of Grape Solar, a company based in Eugene, Ore., that is a big importer of solar panels from China, Korea and Taiwan, as quoted in the New York Times. Grape Solar has already been in discussions with big Chinese panel makers on ways to move more manufacturing to the United States.”

The report states that around 100,000 Americans are employed in the solar industry in the U.S with about 24,000 manufacturing, including manufacturers of equipment and polysilicon producers. About 50 percent work in installation, construction, and engineering; another 18 percent in sales and distribution. Of the 24,000 people who work in solar manufacturing in the U.S., just about 5,000 manufacture cells or modules that compete with those made in China (and are the subject of the trade case).

Adam Hersh, Economist at the Center for American Progress, argued that if Chinese producers have an unfair advantage, it will undermine the world’s transition to renewable energy as a source of power. “If the producers are being given unfair advantages in China it’s going to undermine innovation in the sector of renewable energy infrastructure and will set back the pace of our transition to using sources of renewable energy. That’s why it’s so important to have a level playing field in this…There are some who argue that we should let in these subsidized, dumped products from China because it makes it cheaper to install and build out renewable energy here in the U.S. But that is a very shortsighted view of the dynamics of the industry. We need to have the innovation competition which will allow us to scale up and produce the most efficient and next generation of solar and other renewable energy sources going forward.”

The main petitioner in the trade case is SolarWorld Industries America, the U. S. division of a German company. SolarWorld operates factories in the United States and Germany and has been the largest U.S. solar panel manufacturer for more than 35 years. SolarWorld is the only vertically integrated company left in the U. S., meaning that it combines all stages of the photovoltaic value chain, from the raw material silicon to turn-key solar power plants. SolarWorld has its U.S. headquarters in Hillsboro, Ore. and a second plant located in Camarillo, Calif.

The other top American company is First Solar that “manufactures thin-film cells and modules (not crystalline silicon photovoltaics) and held the top spot among solar cell and module manufacturers in 2009. It is still the world’s largest producer of thin-film solar modules, accounting for more than 40 percent of world output. First Solar is headquartered in Tempe, Arizona, but the “lion’s share” (68 percent in 2010) of its output is produced in Malaysia.”

The main target of the anti-subsidy and anti-dumping trade case is Chinese company, Suntech Power, which was the world’s biggest producer of solar cells and solar modules in 2010. The company was founded in 2001 by Dr. Shi Zhengrong, who had been a research director of Pacific Solar Pty., Ltd., an Australian PV company. Suntech built its first manufacturing plant in the U.S. in Goodyear, Arizona in 2010, making it the first Chinese cleantech company to set up a manufacturing facility in the U.S. The 50 MW module assembly plant enables Suntech to label solar modules assembled there as “made in U.S.A.” As a result, Suntech now qualifies for federal “Buy American” subsidies.

Andrew Beebe, Chief Commercial Officer at Suntech, wrote an op-ed in the Wall Street Journal stating, “the fact that 95 percent of U.S. solar-related jobs are outside of cell or module manufacturing, is the reason why “many large and small U.S. solar industry leaders – including AES Solar, Dow Corning, Grape Solar, GroSolar, GT Advanced Technologies, MEMC/SunEdison, REC Silicon, Rosendin Electric, SolarCity, Swinerton and Verengo Solar – have banded together in the Coalition for Affordable Solar Energy to oppose tariffs and defend free trade. They not only represent American consumers; they represent thousands of American manufacturing jobs and 95% of all American solar-industry jobs.”

The Coalition for Affordable Solar Energy (CASE) states that punitive tariffs against Chinese cell imports could affect solar PV sellers, distributors, and installers and the 76,000 Americans they employ in a number of ways. The imposition of tariffs could cause costs to increase and cause demand for solar products to decline, which would result in an associated reduction in American jobs in areas like installation, construction, engineering, sales, and distribution.

This report makes clear that “China’s solar cell and module manufacturers are highly competitive for many more reasons than having received subsidies on the order of 3-5 percent. Chinese manufacturers will still have the scale, the vertical integration, the discounted materials and equipment, and the low labor costs that allow them to sell cells for significantly less than their American competitors…And they will still have the significant support of the Chinese government’s industrial policy.”

The report then considers actions the U.S. or U.S. manufacturers could take that would help improve their competitiveness in the global solar industry. According to Shyam Mehta, Senior Analyst at GTM Research, Western and Japanese crystalline silicon manufacturers will never beat China at the CSPV game because China has such lower costs. He said that the future lies in either differentiated technology or a new business model. They must either:

  • Commercialize a revolutionary technology at high scale that lowers the PV cost curve. China has had no success developing non-crystalline silicon PV technology. Elsewhere, there is only one notable semi-success, and that is First Solar thin-film technology; or
  • Find a different business model. For example, First Solar and SunPower build and operate solar farms, and have done so successfully in the U.S. The advantage of building and operating solar power plants is that then the company has a dedicated sales channel that insulates its profit margins against China’s low-cost panels.

Others suggest that the U.S. develop an industrial policy and develop U.S. incentives to level the playing field. At present, the scale of Chinese incentives dwarf U.S. efforts. Access to capital is a critical compliment to the United States’ capacity to innovate.” To that end, the SEMI PV Group recommends:

  • Large, long-term, stable, market-side support policies, including a national Renewable Clean Energy Standard (RES), state Renewable Portfolio Standards, buyer incentive programs, and sales and property tax credits;
  • Maintain the Investment Tax Credit (ITC) through 2016;
  • Extend the Section 1603 Treasury Grant Program that has provided a grant in lieu of the advanced energy investment tax credit (ITC);
  • Increase Department of Energy funding for both R&D and manufacturing infrastructure development of the U.S. solar industry;
  • Establish the R&D tax credit on a long-term basis to assure solar manufacturers greater consistency in tax and investment planning;
  • Revive the Advanced Energy Manufacturing Tax Credit (MTC), and creation of a federal Green Bank to supplement PV and other green energy projects, particularly for manufacturing; and
  • Work with foreign counterparts and the WTO to develop a strong, effective and enforceable rules-based international trading system that promotes free and open trade.

“We need to make sure we are investing in the foundations of innovation here in the United States to give our companies the policy environment they need to remain competitive against a rising China…we have to make sure that we do not cede critical American jobs to the Chinese – in solar manufacturing as in other U.S. industries – just because we were lax on the policy side,” argues Melanie Hart, Policy Analyst for Chinese Energy and Climate Policy at the Center for American Progress.

Speaking at the Conference on the Renaissance of American Manufacturing, Gordon Brinser, President of SolarWorld Industries America, said that the U.S. must respond more quickly when there is evidence that China is violating international or domestic trade laws. Brinser recommended some specific policy improvements:

  1. The administration’s new trade unit should closely monitor import data for early signs of market distortions spurred by foreign governments;
  2. Our trade agencies must look hard at ways to preserve an open, transparent process for trade cases but in fewer steps and less time;
  3. They also must, in conjunction with U.S. Customs, aggressively find ways to anticipate and stop circumvention of trade remedies and theft of intellectual property;
  4. The government should bring legitimate cases for industries that are too small or injured to afford them; and
  5. The government must shed light on foreign companies that raise capital on U.S. exchanges and then withhold audit information from securities regulators.

I believe implementing these recommendations would benefit American manufacturers in all industries. The solar industry has not been the only target of Chinese “dumping.” We must enforce international and domestic trade laws to protect our entire manufacturing industry if we ever want to revive our economy and create more American jobs.

Posted in Cleantech, Energy, Manufacturing, Outsourcing | No Comments »

What’s Really Happening to America’s Solar Industry?

Tuesday, February 21st, 2012

There’s been a lot of negative press about the American solar industry in the past few months because six companies went bankrupt in 2011, even after receiving government loans.   At least 12 U.S. manufacturers have suffered layoffs, plant shutdowns or bankruptcies over the past two years.  Solyndra and Evergreen Solar are the most well-known because of media coverage about their government loans, but Beacon Power Corp, Mountain Plaza, Stirling Energy Systems, and Spectrawatt Inc. also went out of business, resulting in the loss of thousands of jobs.  What’s behind the financial trouble that many of these American solar companies have experienced?

“Dumping” of solar cells and modules produced in China is the real culprit for the financial woes of the American solar industry.  According to a report released by George Washington University in December 2011, China’s production of solar photovoltaic cells and modules has grown from 1 gigawatt (GW) to 20 GW in three years, and its industry now accounts for more than 50 percent of the global market.  During the same period, prices for solar modules decreased to $1.40 per watt and may go down as low as $1 per watt.  It is clear that over capacity in both purified silicon feedstock and module manufacturing have played a key role in the recent major price declines.  The annual market for solar more than doubled between 2009 and 2010.  For 2011, estimates of total market range from 21 to 24, which is a 44 percent increase from the year prior.

On October 19, 2011, SolarWorld, the largest U.S. producer of crystalline silicon photovoltaic products, filed antidumping and countervailing duty petitions at the International Trade Commission (ITC) of the Department of Commerce.  The petition alleges that China is unfairly subsidizing its solar manufacturing industry with cash grants, multi-billion dollar preferential loans, raw material discounts, tax incentives, and currency manipulation.  SolarWorld seeks to establish that Chinese companies could not possibly have production costs low enough to be selling modules and cells at their current prices in the U.S.

SolarWorld’s petitions were supported by six other members of the newly formed Coalition for American Solar Manufacturing, started by a group of seven U.S. solar manufacturers that has grown to 150 companies representing employing more than 14,650 workers.  However, SolarWorld was the only U.S. manufacturer identified publicly in these petitions because the “unnamed companies are said to fear retaliation from essential Chinese suppliers and customers and, if they have facilities in China, the Chinese government.”

China’s Ministry of Foreign Commerce responded to these petitions as being overly protectionist and a threat to global economic recovery. China’s Suntech, the world’s largest solar panel maker, with manufacturing facilities in Goodyear, Arizona, stated that “a misguided solar trade conflict against China…could threaten the livelihood of the global solar ecosystem, particularly solar jobs in the U.S.”

U. S. opponents of the petition have formed the Coalition for Affordable Solar Energy (CASE) recruiting 132 solar companies as members representing 13,134 jobs.  Kevin Lapidus, Sr. V. P<> of legal and government affairs for SunEdison, a lead member of CASE, said “Today the solar industry is 100,00 employees of which 57 percent are in the installation business, 21 percent are in sales and distribution, and only 14 percent are in manufacturing.”  These companies benefit from the cheap Chinese products they sell, distribute, and install.

The petitions request that the ITC investigate imports of Chinese crystalline solar cell and modules but exclude thin-film products and solar technology that is not photovoltaic, such as solar thermal products.

The petitions seek relief for the U.S. domestic companies injured by Chinese imports and seek duties to offset Chinese dumping alleged to exceed 100 percent.  “The countervailing duty petition alleges that China illegally subsidizes its solar industry by providing cash grants; discounted polysilicon and aluminum necessary for production of solar panels; heavily discounted land, power and water; multi-billion dollar preferential loans and directed credit; tax exemptions, incentives and rebates; and export grants and insurance. The countervailing duty petition also alleges that China’s currency undervaluation is an illegal subsidy.”

The next step is for the ITC to decide whether the petitions are legally and factually sufficient and are adequately supported by the U.S. industry.  During such investigations, the Commission gathers information from the U.S. industry and the ITC gathers information from the foreign government and industry.

On December 2, 2011, the ITC issued a unanimous preliminary determination that Chinese trade practices are harming the U.S. domestic solar manufacturing industry.  The next step in the trade case will be Commerce’s preliminary determination on whether to levy countervailing import duties to offset the effects of any illegal Chinese subsidies.  The finding of “critical circumstances” means that if the agency imposes preliminary countervailing duties on March 2, the duties will apply to all imports of cells and modules from Chinese exporters that were brought into the United States starting Dec. 3, 2011.

This critical-circumstances ruling marks the first time that Commerce has issued such a finding in advance of a preliminary countervailing duty determination.  Aside from the determination on countervailing duties, the agency is scheduled to issue a separate preliminary ruling on anti-dumping duties on March 27.  Commerce will issue a separate critical-circumstances ruling in the anti-dumping investigation. A final decision from the U. S. ITC can take up to a year.

On February 7, 2012, the National Renewable Energy Laboratory posted a revised research presentation on the NREL website, which CASM praised.  The presentation concludes Chinese production of crystalline silicon solar technology for the U.S. market costs more than U.S. production for the domestic market, when the costs of shipping are included.

CASM contends the findings validate its position that the Chinese solar-manufacturing industry doesn’t enjoy a cost advantage in solar production costs but, rather, benefits from a government-underwritten export campaign designed to injure competition from U.S. manufacturers.

The NREL presentation, “Solar PV Manufacturing Cost Analysis: U.S. Competitiveness in a Global Industry,” concludes that Chinese producers have an inherent cost advantage of no greater than one percent, compared with U.S. producers.  However, when trans-ocean shipping costs are counted, Chinese producers face a 5 percent cost disadvantage, according to the analysis…Massive government subsidies the government says, sponsor the Chinese industrial drive to export about 95 percent of domestic production, a campaign that has already seized 55 percent of global market share.”

“This analysis from the renewable-energy research arm of the U.S. government corroborates our view that an export drive sponsored by the Chinese government is improperly intervening in the U.S. market,” said Gordon Brinser, president of SolarWorld Industries America Inc., based in Oregon.  “Highly efficient U.S. producers like SolarWorld can vie with any company in the world in legal competition.  But the government of China’s illegal trade practices are neither economically nor environmentally sustainable for anyone.  Free trade is trade free of illegal foreign government intervention.”

“We are countering the illegal trade practices of China and its state-sponsored industry only as a first step to reviving renewable-energy competition, manufacturing and jobs and augmenting national energy security and world environmental stewardship,” Brinser said. “All of the advantages of solar should be available to the United States and to the competitive U.S. industry that pioneered this technology.”

Chinese silicon solar PV producers more than doubled their exports of crystalline silicon solar cells and modules in advance of potential U.S. government duties on those imports, according to an evaluation of PIERS’ reports, which are based on US Customs and Border Protection Automated Manifest System data.

“This significant increase in imports demonstrates that the Chinese know they have violated U.S. and international trade rules and are trying to evade the consequences,” said Gordon Brinser, president of SolarWorld Industries America Inc., based in Oregon.  “Year to date, Chinese imports of solar cells and modules in 2011 are up 346 percent by quantity and 138 percent by value. Since 2008, Chinese imports have risen 939 percent by value and 1664 percent by quantity.  This most recent surge of Chinese solar imports gives the U.S. Department of Commerce the evidence it needs not only to make a preliminary determination in our favor, but also to apply a critical-circumstances finding to address this last-minute import surge.”

“The Chinese have made it clear that, contrary to various World Trade Organization agreements they signed 10 years ago, they will employ any means necessary to dominate the American and international solar markets,” Brinser said.  “Rather than reward the Chinese for cheating, Commerce and the International Trade Commission need to take every possible action to enable American manufacturers to compete fairly.”

Most of the solar technology was developed in the U. S., but the Chinese government decided the industry was something it wanted to dominate and provided the financing necessary to its manufacturers to build the capacity to do so enabling China to take a dominant market position. Chinese companies such as LDK Solar, JA Solar, Suntech, and Trina Solar obtained billions of dollars in financing from the China Development Bank in the last five years.

In contrast, the U.S. solar industry has had to rely on a tax credit to fund its expansion until federal stimulus money gave a jolt to the industry.  This funding was given to solar and wind project installers, not manufacturers. Investor advisor, Travis Hoium wrote, “Since it was a tax credit, it often required a tax equity investor, often a foreign company, to fund the project. The subsidy was there, but instead of being direct, it was convoluted and too complex to be as effective as China’s subsidies in building an industry.”

He added, “The stimulus money helped in some ways. The 1603 Treasure Program turned the tax credit into a cash grant for 30% of a renewable energy installation’s cost, helping attract more investors. But more direct funding blew up in the government’s face.  The Solyndra debacle showed that loan guarantees don’t guarantee success and that the government probably isn’t the best at picking industry winners.  The outrage after the company’s collapse could be heard around the country.”

This shows the contrast in the ways that China and the U.S. have subsidized their solar industries.  As a capitalistic economy, the U. S. doesn’t want direct government meddling in business.  On the other hand, China will subsidize businesses to create jobs and help them maintain their position as the world’s #1 exporter.

Filing a trade case is the last resort for an industry harmed by China’s “dumping,” government subsidies, and currency manipulation.  Other industries that have been forced to file similar cases are steel, semiconductors, textiles, furniture, and tires.  This latest case is part of a long trend of industries on the verge of being wiped out by China’s predatory mercantilism.  Our elected leaders seem to be afraid to do anything because it would start a trade war.  When are our leaders going to realize that we are already in a trade war, and China is winning?  If China can defeat us in an economic war and destroy the economy of the United States, they won’t have to fight us in a military war.  It’s time for our elected to have the courage to stand up to China and address China’s “dumping” and currency manipulation.  We Americans need to demand action!

 

 

 

 

 

 

 

 

 

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How Free Trade Agreements Lead to Job Loss and Wealth Gaps

Tuesday, August 2nd, 2011

Since the year 2000, the United States has lost over 5.5 million manufacturing jobs, nearly 50,000 manufacturing companies, and racked up an annual trade deficit with China of $273 million in 2010, up from $83.8 million in 2000.  These escalating trade deficits with China have far-reaching effects, particularly on American workers.  This article will examine the impact of free trade with China as documented in two of the annual reports submitted to Congress by the bi-partisan, 12 member U. S.-China Economic and Security Review Commission (USCC).

The 2007 report included a case study of the local impact of trade with China on North Carolina.  The USCC report stated “the accelerating decline in North Carolina’s manufacturing employment is due in large measure to increasing competition from imports mostly from China . . . The combination of China’s 2001 admission to the World Trade Organization (WTO), which gave it quota-free access to U.S. markets for its textile and clothing exports, and the subsequent U.S. grant of Most-Favored (Trading) Nation status that lowered most tariffs on Chinese imports, battered North Carolina’s textile and apparel industries, and they never recovered.”

During the period of 2001 -2007, the number and proportion of jobs in the North Carolina services sector increased.  This shift put downward pressure on wages because manufacturing historically paid substantially higher wages than the services sector.  The shift also reduced the number of workers receiving such fringe benefits as retirement and health insurance, in part because some of the displaced workers were able to find only part-time jobs that often do not offer benefits.

Because a greater proportion of North Carolina’s workforce had manufacturing jobs than any other state, North Carolina’s workforce was more vulnerable to competition from imports than the workforces of other states.  North Carolina’s manufacturing economy was made even more vulnerable by its concentration in the import-sensitive sectors of textiles, apparel, and furniture.   According to the National Council of Textile Organizations, the U. S. textile industry dropped from the worlds second in basic manufacturing industries in 1991 with $244 billion in sales, down to third in 2002 with $60 billion in sales.11 North Carolina is one of the southeast states that had a large number of textile companies.

The North Carolina Employment Security Commission’s Labor Market Information Division followed the employment prospects of 4,820 workers laid off from bankrupt Pillowtex in 2003, which was the largest mass layoff in North Carolina history.  “About 40 percent of the laid-off workers had not yet found work, three years after they lost their jobs, and for those who have, take-home pay isn’t as much as they were making at Pillowtex.”  The article reported that North Carolina has been the most impacted state in the nation by layoffs due to trade.  Between 2004 and 2006, almost 39,000 North Carolina workers were certified by the Trade Adjustment Assistance program as having lost jobs to trade, more than 10 percent of the U.S. total of 387,755.”

According to the Social Science Research Institute (SSRI) of Duke University in North Carolina, there
were 2,153 textile and apparel plants in North Carolina employing 233,715 people in 1996.  By 2006, the apparel industry had experienced a 70% decline in jobs and 55% loss of plants.  The textile industry by comparison had only lost 63% of jobs and 32% of plants from 1996 to 2006.

“Trade agreements can profoundly affect state and regional economies and particular industries.  While trade agreements that lower import barriers among America’s trading partners have the potential to benefit American exporters, North Carolina appears to have realized few if any substantial benefits from China’s admission to the WTO, and the net effect of trade with China since its accession appears to be negative overall for North Carolina’s economy.”  It isn’t just people losing jobs and not being able to find other employment that pays as well as their former jobs, “hundreds of small towns throughout North Carolina impacted by plant closures are dying.”

How does the downturn in the textile industry in the South affect other regions of the country?  San Diego is a long way from North Carolina so you wouldn’t expect there would be much impact.  However, the San Diego region has a large number of companies manufacturing sporting vehicles, such as dune buggies, go-karts, mini-motorcycles, etc.  The connection is that the Southeast has traditionally been the largest market for go-karts, and the majority of U.S. textile companies were located in the Southeast.  A San Diego company that has manufactured parts for go-karts for over 40 years revealed that their sales of go-kart parts had dropped significantly in the past ten years in the Southeast.  Go-karting is mainly a hobby of blue-collar workers, such as textile workers.  Many of the thousands of workers who lost their jobs in the textile and apparel industry were not able to find equally well-paying jobs in other manufacturing sectors.  The average weekly salary for a U.S. textile worker was $487 in 2002, 38 percent more than the average salary of $301 for a worker in a retail store, such as Wal-Mart.  When a family’s disposable income drops drastically, money for non-essentials, such as go-karts is cut or goes away altogether.

The loss of these well-paid manufacturing jobs in North Carolina’s textile industry may have resulted in families losing their homes and/or being forced to relocate to other areas of the country to find jobs.  Taking lower paying jobs in their own communities may have resulted in families no longer being in the middle class income range.  And, those who haven’t been able to find any work or only part-time work may have even dropped down to the poverty level.

What about all the jobs that were supposed to be created in the green and clean technology industries?  Is our free trade agreement with China as part of the World Trade Organization having an effect on these industries also? This is of particular concern because the Obama Administration has repeatedly emphasized green technology’s role in job creation and highlighted green technology in its 2010 National Export Initiative, which is intended to double the level of U.S. exports within five years.  According to the U.S. Department of Commerce, the green sector has the potential to fuel economic growth in the immediate future.  More than two dozen states have also identified green technology’s potential to create jobs and to revitalize manufacturing areas that have been damaged by imports, outsourcing, and the loss of export markets abroad.

The USCC’s 2010 Annual Report to Congress discussed China’s green energy policies and efforts to promote alternative energy sectors as part of its analysis of the U.S.-China relationship in several areas.

 

One key development in 2009 was a ban in China on deployment of turbines of less than 1,000 kilowatts for most projects, on the grounds of inefficiencies.  The ban had a discriminatory effect on imported turbines, since most of the smaller models are produced by European and American companies.  Larger wind turbines are more expensive and require substantial new investment to build but require comparatively less maintenance and can be more efficient, because they require fewer installations.  But the larger wind turbines require new investment by manufacturers.  Many foundries in the United States, for example, are reluctant to invest in new, larger molds for the larger turbine casings unless they can be guaranteed a substantial production run.  Chinese state-owned foundries are under no such profit constraints.

“U.S. firms are losing global market share in the green technology sector, mostly to China, with solar panel manufacturing experiencing a particularly severe loss.  As various sources have noted, China became the largest producer of solar panels in the world in 2008, shipping 2,600 megawatts of photovoltaic panels, enough for about one-third of annual world supply.”

U.S. and Chinese firms are both engaged in active research and development for electric vehicles and their fuel cells or batteries.  To spur the entry of electric vehicles into the market, China has created a mandate for increased vehicle emissions standards in the next ten years, with plans to reduce gasoline consumption by vehicles 60 percent by 2020.  This is expected to spur the development of an electric vehicle market.

Recent reports have noted that China is considering a new technology transfer requirement for foreign automakers.  China’s Ministry of Industry and Information Technology is ‘‘preparing a 10-year plan aimed at turning China into ‘the world’s leader’ in developing and producing battery-powered cars and hybrids,’’ according to executives at four foreign car producers familiar with the plan.

In the area of alternative energy, China is following a familiar pattern of choosing an industry sector and showering it with a comprehensive mixture of subsidies and incentives.  In this case, China also intends to establish certain alternative energy industries as ‘‘national champions’’ able to dominate world export markets.  China has already developed the world’s largest manufacturing capacity in solar panels.  Its capacity is far larger than that needed to satisfy domestic demand; 90 percent of the solar panels manufactured in China are exported.  China also has a large number of installed wind turbines and is rapidly developing new technology for a growing global market.  China’s domestic wind turbine industry operates behind a protectionist barrier.  Only the largest wind turbines may be installed in China.  This excludes many U.S. and European turbines, which are typically smaller.

What have been the long term effects of the loss of manufacturing jobs on America’s working class?  On July 25, 2011, the Pew Research Center released a report based on their analysis of new census data, which shows that the wealth gaps between whites and minorities have grown to their widest levels in a quarter-century.  I believe that this is the direct result of the loss of manufacturing jobs in the last decade, exacerbated by the loss of jobs in the construction industry since 2007 with the burst of the real estate bubble.

The numbers are based on the Census Bureau’s Survey of Income and Program Participation, which sampled more than 36,000 households on wealth from September-December 2009.  Census first began publishing wealth data from this survey, broken down by race and ethnicity, in 1984.

Household wealth is the sum of assets (houses, cars, bank accounts, stocks and mutual funds, retirement accounts, etc.) minus the sum of debt (mortgages, auto loans, credit card debt, etc.).  It is different from household income, which measures the annual inflow of wages, interest, profits and other sources of earning.  Wealth gaps between whites, blacks and Hispanics have always been much greater than income gaps.

The median wealth of white U.S. households in 2009 was $113,149, compared with $6,325 for Hispanics and $5,677 for blacks, according to the analysis released Tuesday by the Pew Research Center. Those ratios, roughly 20 to 1 for blacks and 18 to 1 for Hispanics, far exceed the low mark of 7 to 1 for both groups reached in 1995, when the nation’s economic expansion lifted many low-income groups to the middle class.  The white-black wealth gap is also the widest since the census began tracking such data in 1984, when the ratio was roughly 12 to 1.

According to the Pew study, the housing boom of the early to mid-2000s boosted the wealth of Hispanics in particular, who were disproportionately employed in the thriving construction industry.  “After reaching a median wealth of $18,359 in 2005, the wealth of Hispanics …declined by 66 percent by 2009…  Among blacks, who now have the highest unemployment rate at 16.2 percent, their household wealth fell 53 percent from $12,124 to $5,677.”

“Typically in recessions, minorities suffer from being last hired and first fired. They are likely to lose jobs more rapidly at the beginning of the recession, and are far slower to gain jobs as the economy recovers,” said Harrison, who is now a sociologist at Howard University. “One suspects that blacks who lost jobs in the recession, or who have tried to help family members or relatives who did, have now spent whatever savings or other cashable assets they had.”

Asians lost their top ranking to whites in median household wealth, dropping from $168,103 in 2005 to $78,066 in 2009. Like Hispanics, many Asians were concentrated in states like California hit hard by the housing downturn. More recent arrivals of new Asian immigrants, who tend to be poor, also pushed down their median wealth.

In San Diego, the factory floor is comprised primarily of Asians, Vietnamese, Cambodian, Laotian, and Hmong, many of whose families came to the United States as refugees, with little formal education.  The balance of manufacturing workers is mainly Hispanics, with a small percentage of whites and blacks.  In other parts of the country, this mix of factory workers may comprise a higher number of working class whites and blacks who were able to get jobs in manufacturing with only a high school diploma or GED.

For the past 60 years, the manufacturing sector offered the best opportunity for persons with only a high school diploma or GED to have upward mobility — starting at an entry level wage, but having the opportunity to advance to better paying jobs through experience, training, and education.  With millions of manufacturing jobs gone, the opportunity to live the American dream is disappearing.  As a nation, we are in danger of becoming a two-class society of rich and poor, haves and have-nots, with the rapidly disappearing middle class.  We must stop this slide into becoming a third-world country.   It’s time for us to review our unilateral free trade agreement with China that only seems to benefit China at the cost of jobs and even whole industries in the United States.

Posted in Cleantech, Outsourcing, Trade Policy | No Comments »

San Diego’s Cleantech Manufacturers Create Jobs

Tuesday, May 24th, 2011

San Diego is a natural setting for clean tech collaboration.  Meaningful partnerships with private and public sector champions has resulted in the formation of CleanTECH San Diego to promote sustainable best practices and promote the San Diego region’s high concentration of clean tech activities.  By collaborating with the multitude of stakeholders, CleanTECH leverages these assets and positions itself as a world leader.  With over 750 cleantech companies who call San Diego home, San Diego ranks 7th in the Sustainable World Capital’s list of “Top 10 Cleantech Cluster” of global cleantech leaders.

The growing web of collaborative partnerships and networks includes:  Austrade, Biocom, California Center for Sustainable Energy, Carlsbad Chamber of Commerce, Centre City Development Corporation, City of Chula Vista, City of San Diego, CONNECT, California Clean Tech Open, Global CONNECT, North County Economic Development Corporation, San Diego Center for Algae Biotechnology, San Diego Regional Chamber of Commerce, San Diego Regional Economic Development Corporation, San Diego Regional Sustainability Partnership,   San Diego Software Industry Council, San Diego State University, TechAmerica, The San Diego Foundation, Scripps Institution of Oceanography, Tijuana EDC, UCSD Environment and Sustainability Initiative, and the UCSD Energy Policy Initiatives Center

CleanTECH categorizes its members into two groups, Innovators and Facilitators.  Innovators are companies that create or invent new technologies in areas such as advanced materials, air & environment, biomass energy & biofuels, energy efficiency, energy generation, Solar, water, wind, energy infrastructure, energy storage, fuel cells & hydrogen technologies, green construction technology, recycling & waste, Smart Grid, transport technology, and wastewater.

Facilitators are companies that install or implement existing technologies in architecture, construction, design and engineering, industrial products, lighting systems, energy audit, energy transportation, energy storage systems, recycling services, solar energy systems, sustainable building supplies, water, wave, wind, and ocean energy systems, and consulting in energy, environment, and green building.

In 2010, CleanTECH led a region wide partnership to bring over $150,000,000 in Clean Renewable Energy Bonds (CREBs) to the greater San Diego region, launched a robust website and database showcasing the over 750 companies that now call San Diego home, sponsored or co-sponsored over 80 networking events, received multiple awards honoring their collaborative initiatives on behalf of the region.

At a meeting of the San Diego Venture Group in April 2010, venture capitalist Ira Ehrenpreis commented that cleantech was now garnering 25 percent of venture funding, particularly in the area of renewable energy generation and energy storage.  Enhanced water quality technologies and biofuels are also of great interest to venture capitalists.

It is the innovators that are creating the manufacturing jobs.  I had the pleasure of meeting some cleantech manufacturers at a “connect with CONNECT” meeting a couple of months ago.  I subsequently visited the facilities and interviewed the principals of two of the cleantech companies I had met at the meeting.

The first was EcoDog, formerly called Environmental Power Products.   Founded by Ronald Pitt in his garage, the company was incorporated in 2005, and occupied its first commercial space in Vista.  The company moved to the Sorrento Mesa area of San Diego in 2010.  Feeling the need to have a catchier name, the name was changed to EcoDog because all of the members of the management team have dogs that they like to have with them in their offices at work.  The principal members of the management team worked in the power and energy industries for more than two decades.   EcoDog was founded on the principle that through the use of state-of-the-art technology and innovative products, we can regain control of energy consumption.  We can stop worrying and be confident that we are doing our part to conserve easily and affordably.

EcoDog participated in CONNECT’s successful Springboard program during its infancy as a company and received angel investment.  Extensive R&D efforts led to successful beta testing in 2008, a limited release, pilot program in 2009, and full production that started in the second quarter of 2010.   EcoDog’s FIDO Home Energy Monitor provides a new level of visibility to electricity consumption that gives homeowners unprecedented power over their energy use with unique room-by-room views of where their energy dollars are spent and personalized GridSmart(TM) savings.

A homeowner is able to measure circuit-by-circuit, room-by-room of their electricity usage to save 15 to 25% or more every month.  The system sends out a message weekly via text message or email of the usage, and if there is unusually high usage that occurs on a circuit, the homeowner will be notified immediately via text or email.

As the utilities roll out their new generation of Smart Meters with complex time-of-use billing schemes, the savings that result from EcoDog’s comprehensive FIDO real-time home energy monitor will be even more dramatic.

Because EcoDog’s FIDO system is also compatible with alternative energy generation including solar and wind, users with these configurations will, for the first time, have access to real-time monitoring of power input as well as power consumption with detailed net metering showing both dollars and KW hours.

President Ron Pitt said, “At EcoDog we are taking full advantage of the San Diego manufacturing sector.  By building our sub-assemblies at local contract manufacturers and performing final testing and assembly at our San Diego facility we are able to be more responsive to our customers and maintain higher quality standards while carrying lower inventory levels than we would be possible manufacturing overseas.”

EcoDog was a “greatest gadget” winner in the CommNexus Gadget Fest of 2009.  And, BUILDING PRODUCTS magazine selected EcoDog’s FIDO Home Energy Watchdog as one of only 16 award recipients in its third annual Green Product Awards contest in 2010, with the winners representing some of the best new eco-friendly products for the home.

The second company, Hadronex, was formed in 2005 to solve problems in the water and wastewater industry through contemporary innovative accessible technology.  Hadronex is dedicated to providing solutions that the industry desires and needs, using state-of-the-art and proven technologies for effective, low cost, robust products and services.

Hadronex, Inc. was founded by two technologists, David Drake and Greg Quist, who are also well-known industry policy makers that have been actively involved in the water and wastewater industry for more than two decades.  David and Greg met while they were on different water boards and started their company to address the major problem of the wastewater industry – preventing sewer spills.  As a result, the company’s mission is:  Defending the environment…Saving energy and money…Protecting Public Health.

Hadronex’ award-winning SmartCover® monitoring system is a completely self-contained, turnkey solution developed specifically for the water and wastewater industry.  Developed in close collaboration with industry leaders, the SmartCover® system was built to solve industry problems at high value and low burden.   It is basically a high-tech manhole cover to prevent sewage spills by monitoring the level of sewer water in the system and providing an alarm when the sewer water is in danger of overflowing or spilling. To date, the SmartCover® has prevented over 2500 sewage spills.

Providing complete reliable two way wireless communications, the patented SmartCover® system provides real-time continuous remote sensing, providing alarms to devices of the customer’s choice, an easy-to-use web based interface, and long and short term data collection and analysis.  Built to operate at sites that are environmentally difficult, have no power or communications, the SmartCover® provides “instant infrastructure” - it can operate virtually anywhere in the world, installs in minutes and is on-line and ready to use immediately.

Backed by a team dedicated to uncompromising customer service, the SmartCover® system is the solution to monitoring water and wastewater sites, providing remote security, or monitoring environmental or critical locations.

The SmartCover® system has emerged as the industry leader in widely deployable sanitary sewer collection system management.   Working closely with its customers, Hadronex and the SmartCover® solution continue to evolve to serve more diverse applications and industries.

The SmartCover®-G is a wireless gas monitoring system utilizing the SmartCover® wireless monitoring system with gas sensors instead of an ultrasonic sensor. The SmartCover®-G continuously logs gas concentrations, and is designed to provide an alarm based on a “High Level” condition. The configuration and applications vary depending upon customer requirements. The SmartCover®-G is the ideal solution for ambient air quality monitoring.

Greg Quist said, “One of the important factors in our success here in San Diego is the confluence of environment and opportunity.  Hadronex reflects the concern for the environment and the technological experience to do something about it.  Our ideas and designs were catalyzed and supported by the water industry, and our products and business have been supported by the cluster of local manufacturers and technology companies.”

David Drake said, “The key for our fabrications process to locate that very small sweet spot in contract manufacturing between capability, flexibility, and cost.  We found the right partners who took responsible steps to improve the pro and who would allow direct engineering relationships to speed up closure.  We also chose companies that were not too large or small in comparison with our own size.  This has proven successful.”

These companies are just two examples of companies that are providing solutions to real problems while creating the higher paying manufacturing jobs our region needs.  With long-term limitations on natural resource consumption, our nation needs sustainable economic development that provides the higher paying manufacturing and professional service jobs.  Cleantech manufacturing companies using innovative technologies such as EcoDog and Hadronex provide a way to achieve both goals simultaneously.

Posted in Cleantech | No Comments »