US Stimulus, Cleantechs, and Foreign Investments

Recently we witnessed Chinese company Suntech Power investing in U.S solar panel manufacturing. However, they received American stimulus funding to foster the investment. Suntech’s investment comes as anxieties are rising in Washington over foreign domination of the U.S. cleantech space. In late October the announcement of a Chinese-U.S. consortium planning to build a wind park in Texas using imported Chinese turbines led to calls that federal subsidies should be pulled from the project. The same month, a report from the Investigative Reporting Workshop found that in the wind sector, where foreign manufacturers dominate the market, overseas companies have received 84% of more than $1 billion in federal clean-energy grants released since Sept. 1. The study did not focus on solar energy, but the majority of solar panels are also produced by European and Asian companies.

The U.S. is part of the WTO and, therefore, has mutual obligations to its trading partners (in addition to other trade agreements such as NAFTA). Furthermore, the American Recovery and Reinvestment Act did not frame any “buy at home” clause other than for the use of steel products. Stimulus dollars should be used to create employment in the U.S., and the funds provided to foreign companies will, either directly or indirectly provide U.S. employment (parts and raw materials, assembly, infrastructure prototyping and construction, operations and maintenance, process engineering, distribution/energy grids, etc.).

Given CO2 and GHG mitigation costs, efforts to demonstrate environmental benefits and sustained economic growth become critical. Moreover, as the U.S. is trying to restore its global contribution, I would venture to say that now is not the best time to become protectionist. However, the temptation is great in recessionary times when elections are just around the corner. The U.S. needs to be competitive to win in clean technology markets. Is protectionism the answer to competitiveness?