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China-U.S. trade war would hurt California

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When the International Trade Commission issues its final decision next month on whether U.S. solar cells manufacturers have been harmed by imports from China, the stakes will be high for California's economy.

With the Commerce Department having approved tariffs of up to 250 percent on Chinese-made silicon photovoltaic cells, the International Trade Commission still can slow the slide to a mutually destructive trade war that would hurt California. A trade war with China would not be beneficial for the U.S. solar industry.

As the largest exporting state to Asia, California exported $14.2 billion in goods and services to China in 2011. Last year, more than 28 percent of California-made computer and electronic parts were exported to China.

With its historic relationship with Asia and its trade agreement with China, San Francisco has a lot to lose.

Last year alone, the San Francisco-Oakland-Fremont area exported $2.1 billion in products and services to China, having increased these exports by 86 percent between 2005 and 2011. In spite of the push for protectionism, free global competition and falling prices have benefited the U.S. solar industry. With more than 5,600 companies and over 100,000 solar workers, the U.S. solar industry has been expanding its workforce by 6.8 percent a year, adding 6,700 jobs in 2011, while the entire economy had a job-growth rate of only 0.7 percent.

In California - the nation's leader in solar jobs - the industry has an estimated 25,575 jobs at 3,550 locations.

The sector that tariffs are supposed to protect - silicon solar cell manufacturing - accounts for only 2 to 3 percent of the jobs in the U.S. solar industry. The other 97 percent either manufacture machinery or complementary components, such as inverters, wiring or racking, or they work in construction, installation, finance, logistics, marketing, or engineering.

To the extent that SolarWorld - the German-owned company that is pushing for punitive tariffs - is not doing well, it's because it failed to keep up with changing market conditions. SolarWorld was a latecomer to the California utility market, and it shouldn't punish companies that bet successfully on the industry's future.

For the U.S. solar industry, the real competitor is not imported photovoltaic cells but electricity generated from fossil fuels, especially natural gas extracted by fracking. California companies have lowered the prices solar must achieve to remain competitive. In order to continue to receive new contracts, solar is forced to generate electricity at a price comparable to that of conventional energy sources. The last thing the industry needs is higher costs imposed by punitive tariffs.

One other thing the industry doesn't need is making these tariffs retroactive 90 days before the Commerce Department even announced its decision. Yet that's what the Commerce Department has done, and the International Trade Commission should overrule that decision.

Retroactive duties hit small companies hardest. For instance, Marco Mangelsdorf, a solar contractor from Hilo, Hawaii, told a hearing of the U.S. International Trade Commission on Oct. 3 that he had received a notice from U.S. Customs and Border Protection that he needs to pay $138,000 in additional duties on $54,000 worth of imported solar equipment that he had purchased before the preliminary tariffs were imposed. Instead of a trade war that would destroy businesses and jobs in California and across the country, the United States and China should reach a broad trade agreement encouraging fair and free trade benefiting both countries' solar industries.

Jigar Shah is the president of the Coalition for Affordable Solar Energy (CASE) and the founder of SunEdison, a solar energy services company with offices in Sacramento, San Clemente (Orange County) and Ontario (San Bernardino County).

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