The U.S. government is now considering additional actions aimed at holding China accountable for its trading practices. The most recent dispute, the potential dumping of Chinese subsidized solar products onto U.S. markets. According to reports from Bloomberg, the Chinese government is expected to render an initial factual determination in November, a full eight months ahead of schedule. At this point is difficult to determine whether China is unfairly subsidizing “green” technologies, or whether U.S. manufacturers simply cannot compete without new, additional government subsidies of our own. Regardless, recent events have helped highlight how multiple issues are intertwined and these allegations highlight America’s weak, and sometimes contradictory, response to world trade.
There is at least an indicia of evidence suggesting that China may not be playing fairly. After all, China has a history of playing fast and loose with existing trade agreements by unfairly withholding rare earth materials from markets, and unfairly subsidizing their emerging markets on everything from light vehicle tires to solar panels.
China must be held accountable for illegal trade practices that unfairly put American entrepreneurs at a disadvantage, regardless of the product at issue. Given that China has continuously enjoyed “most favored nation” (MFN) status since 1980, we are more than justified to demand a level playing field. Free trade and free markets are not free if one side frequently fails to abide by the rules.
There is a more important point to be made regarding renewable energy. While renewables hold much promise, we need to put it in context of America’s overall energy policy. The cost of “green” technology is very high and is not economically self-sufficient to replace traditional energy sources and without massive subsidies, most consumers cannot afford wind and solar.
Even after President Obama has given billions, and is prepared to surpass $90 billion in taxpayer subsidies to renewable energy companies, such energy is nowhere near enough or reliable to make America energy independent. Given our current debt levels, we should be asking what can we afford to spend on R&D for new energy sources, and should it be anywhere near what big government in Washington has proposed?
What the U.S. needs is a fresh and bold approach towards its trade relationship with China. If we desire the Chinese to play by the rules, their leadership needs to appreciate that they are dealing with a strong America. Part of that solution is a vibrant domestic and foreign policy. On the domestic front, the continuing malaise as a result of uncontrolled government spending has not improved our domestic security. With the national debt surpassing $16 trillion, our economy is anemic at best. That news, when coupled with our continued lack of engagement in Asia, especially in light of Chinese military naval expansion, has world leaders questioning our ability to finance our commitments abroad. For example, China and Russia have openly called for the dollar to be replaced by different currencies as the de facto world standard. All of this is a recipe for further decline in American stature.
To strengthen America, we need an energy policy that is pro-jobs, pro-market and pro-American. That means telling China that their annual MFN renewal is up for “discussion.” That also means harnessing proven energy supplies at home and in friendly countries such as Canada. Unfortunately, BANANA (“build absolutely nothing anywhere near anything”) environmentalists have successfully convinced the Obama Administration to stonewall vital projects. These projects include exploring for energy in the U.S.’s far north regions and building the privately-funded Keystone XL pipeline that would transport Canadian oil to the Midwest.
These two projects alone would create thousands of jobs, billions in tax revenue and reduce our dependence on foreign oil. The truth is that counties in Nebraska have been reducing their tax rates due to income from the original Keystone pipeline (which by the way goes through the same aquifer as the proposed KXL) and unemployment is all but nonexistent in and around the Dakotas, thanks to the energy boom created by crude oil exploration there.
If we had this additional energy online in addition to developing our renewable energy potential, America would be in a much stronger position to influence China.
In business, everyone knows that threatening to walk away from a negotiation can sometimes lead to more favorable terms from the other side – but only if the party walking out means what it says. With a China that has become more confrontational, we cannot approach them with a weak hand that is based on a weak energy policy.
In short, we need an energy-neutral policy that truly promotes “all of the above” – renewable, oil, gas, coal and so on. What we do not need is a policy that has given politically-favored companies such as Solyndra over $500 million in taxpayer dollars that would later be unrecoverable as it, and other companies similarly situated, have gone under.
Having a robust “all of the above” policy along with lower taxes and streamlined regulations will help the renewable energy industry. This industry, along with all others, will have to succeed or fall on its merits in the marketplace without being propped up by government spending that we can ill afford. By promoting true competition domestically, we will see lower prices and more supplies to meet demand. For those who call such supply-demand projections folly, one need only look at the 50 percent decrease in the cost of natural gas brought about by a 20 percent increase in supply.
If policymakers have the strength and resolve to alter course, the U.S. will have the strength it needs to compete evenly and fairly with China and other world powers.
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