Obama’s Solar Panel Tariffs Threaten To Destroy An American Business
Bill Keith built a successful business making solar-powered ceiling fans. The President's trade policies are in the process of destroying it.
On Wednesday, CNN covered the story of a small American business that manufacturers solar-powered attic fans which is about to be destroyed thanks to protective tariffs put in place by the Obama Administration:
Here’s the story:
Keith said the U.S. Customs Department has accused him of using Chinese-made solar panels, in violation of a tough import policy adopted in May at the behest of major U.S. solar companies. The policy is intended to thwart China from undercutting prices and flooding the U.S. market with cheaper solar panels. The U.S. Department of Commerce is currently reviewing the policy, and is scheduled to make a determination in the fall.
Keith denies that any of part of his solar fans are produced in China, but he admits he can’t totally prove it. According to Keith, the owner of the Hong Kong company that customizes his solar cells has stated in an affadavit that it buys the cells from the United States, Taiwan and Germany. But Keith worries that testimony won’t be good enough.
“The solar panel tariff is a broad-reaching tariff. In my estimation it shouldn’t be geared toward small niche markets like mine,” Keith said.
Unless he can show specific manufacturing documentation by August 29, Keith said he could be fined as much as 250 percent on his solar panels — an effective rate of $270,000.
If that anti-dumping fine is levied, Keith said he will have to shutter his business.
“These guys are going to put me out of business,” Keith said. “I don’t have any help. I’ve been trying to get help, no one can help me.”
Keith said he has never received government financial assistance and is taxed in the 40 percent bracket. He said he has sat by and watched companies like the now bankrupt Solyndra run through taxpayers’ money and not return on the government’s investment.
He said he doesn’t want a handout — just a helping hand.
Ironically, it was just a few years ago that Keith was the poster boy for the Administration’s solar energy initiative:
In 2008, his success attracted the attention of the soon-to-be next president of the United States, Barack Obama. That year, he got an unexpected call from a representative of the new administration.
“He said he was with the Obama transition team looking for small companies,” Keith recalled. He later met with the man who told Keith, “we want to interview you, vet you.”
“Guy sat right there talking with me, said ‘I really love your story and I’m going to push it up the rank,'” Keith said.
And that’s exactly what happened. Shortly after he was inaugurated, Obama held a town hall meeting in the economically devastated city of Elkhart, Indiana. Keith and his wife were asked to come and — prodded by his wife — he stood up and told the president about his solar business. He asked
Obama what he planned to do to encourage small business owners like himself.The question turned Keith into a White House solar superstar. ABC, CNBC and other media came calling to tell the story of the roofer who built a solar company out of his garage — and he did so without a government handout.
“Move over Joe the Plumber,” one blog headline declared after his Elkhart appearance. “There’s a new poster child for hard-working Americans — and he’s green.”
Keith’s success story provided good publicity for the White House which called again and again, using Keith to underscore the Obama administration’s goal of pushing America towards new sources of clean energy.
Keith goes on to relate in the video above that he’s been sending repeated email inquiries to his (former?) contacts in the White House about the troubles he’s facing because of the tariff issue, and getting little more than perfunctory “I’ll check into it” type responses. I suppose that’s a lesson right there. Never expect loyalty from a politician. Keith was useful to the 2008 campaign and the White House for a time, but now he’s not and it seems as through he’s being thrown under the bus.
As for the merits of the issue itself, National Review’s Noah Glynn pointed out the flaws in the policy back in June:
The methodology the DOC uses to determine anti-dumping tariffs is inherently flawed. There are two economic classifications a nation can receive: “non-market economy” or “market economy.” For non-market economies, the DOC assumes that government interventions play a larger role than supply and demand in determining prices. The U.S. considers China a non-market economy, which it is. But the DOC then uses this classification to justify unfair and arbitrary methods of measuring Chinese dumping margins, which largely establish the tariff rates.
Since supply and demand are not, under this theory, the prevailing economic forces in China, the DOC tries to estimate what the prices would be in China if it were a market economy. According to Dan Ikenson, a policy analyst with the Cato Institute, the DOC doesn’t actually discover the true price difference, but instead concocts “differences between an exporter’s price in the U.S. market and a fictitious hodgepodge of estimated components serving as a proxy for his home market prices.”
(…)
From currency manipulation to intellectual-property theft, the United States has legitimate economic complaints about China, but there are tangible benefits to the relationship as well, and it would be a mistake for Washington to overlook them. Between 2001 and 2005, American commodity exports to China increased by 81 percent, compared with 10 percent for the rest of the world. For all the talk of China’s export-driven economy, many Americans have become better off thanks to rising Chinese imports, and it would be foolish to undermine that relationship because of desire to shelter favored businesses based on questionable methods.
President Obama’s opponent in the election would likely not disagree with his decision here. If anything, Mitt Romney has called for an even more aggressive stance toward China on trade issues than what the Obama Administration has implemented. So, a President Romney would be likely to double down on these kinds of tariffs, causing even more harm to American businesses like the one described here. It hardly even matters that there isn’t an American solar panel supplier that can fulfill this man’s needs, if he can get the product cheaper and better from another country then there’s no logical reason why he shouldn’t be able to do it. In the long run, that will be good for his business, good for the homeowners who buy his product, and good for the economy as a whole.
It’s an old lesson that our politicians keep forgetting. Free trade always works. Protectionism always fails, and always ends up far more harm than it’s proponents will ever admit to.
Government giveth, government taketh away.
Turns out, regardless of the taxes paid, this guy doesn’t get any of that success the Obama spoke of the government building.
Guess he should have made a bigger donation to the Obama reelection campaign then his phone call might be returned. But apparently, he was outbid by those interests wanting the tariffs. Cronyism at its best.
I agree this is bad policy. If China wants to subsidize their solar panel manufacturers and thereby provide us with really cheap solar panels, well… let’s buy some cheap solar panels.
Bingo!!
Indeed, “anti-dumping” trade restrictions truly are among the dumbest, most self-defeating regulations.
As far as this Keith character goes, and the administration’s solar panel policies, there’s a larger elephant in the room. GE is in the solar panel business. GE wants price and profit margin protection. If GE wants something this administration will move mountains to get it for them.
Concerning Romney, I think we have to separate the rhetoric that unfortunately is necessary to get through a GOP primary season, and its addled demographics, with the shift in approach that presumably would occur if he’s successful in November. It’s hard to believe Romney actually would be dumb enough to want to pursue a trade war with China. Then again, it’s naive to underestimate the damage that politics can do to a politician’s brain.
Name me a regulation, any regulation, implemented by any administration, GOP or DEM, that did not have winners and losers. Can’t? In other news, the sun rises in the east and sets in the west.
ps:
For who? The winners or the losers? Cause there are losers.
The takeaway from this article is that Chinese dumping harms Americans less than the antidumping laws. Was that intentional?
@OzarkHillbilly:
If your business cannot thrive without the government picking you as winner, you are a loser no matter how much the return on cronyism. In fact, you’ve sold your soul to the government store since you’ll have to keep the, uhm, campaign contributions flowing if you want to stay in business.
Politicians, especially liberal politicians, hate free markets as it permits citizens to be successful without giving the politician their tribute.
There is a generalized theory here, and to tell it this way “Obama’s Solar Panel Tariffs” is completely misleading.
“Dumping” has been a crime how long Doug?
Given that dumping has been a crime (for decades at least), the Executive Branch had a law to uphold.
(It is actually a different, deeper question, whether dumping should be illegal, but it is asinine to wake up and pretend it is “Obama’s new thing.”)
@JKB:
So, JKB, one can infer that you believe the government should ensure that EVERY American business is successful? Is that how you believe the free market is supposed to work?
@Rob in CT:
Well, as I say, it is an old and general problem:
The NR and Doug are playing dumb.
And of course, it’s international:
Yeah, and how many more have not? Thanks for highlighting the most ridiculous thing I’ve heard in a while. Accounting is not Economics.
Free trade always works?
Isn’t that a similar argument that many made about the “free markets” prior to 2008?
@Phillip: Yes, accounting is not Economics. People who try to use bean counting instead of economics are much more likely to incorrectly conclude that imports are bad.
Dumping is anti-competitive. Doug implies it all works out in the end. I call shennanigans on that.
Did anyone else notice this about our “American business”?
@JKB:
So conservative politicians who support farm subsidies, oil depletion allowances and so forth also hate free markets, right?
@Phillip, @John Thacker:
I think the deeper question there is whether the economics of comparative advantage really meant that rapid transition to free trade agreements was in the national interest.
Economists use a toy model to think things like comparative advantage through. They think of evenly matched nations (in terms of advantages) and over the long term (with time for everyone to adjust, and re-allocate investment).
That’s actually a different question than “what will a new free trade bill do to employment of non-college graduates over the next 10 years?”
It also doesn’t ask “if we stop collecting tariffs, do we need to charge higher corporate or individual tax to make up the government revenue?”
I assume everyone’s love of free trade extends to the labor market? Should we eliminate those protectionist policies as well?
@Nikki:
I don’t believe that but the Obama said that a business wasn’t successful without the government so that implies government fails when a business is unsuccessful. That isn’t how it works except in the fevered minds of Obama and other “Progressives”
@al-Ameda:
Perhaps not hate, but they sure don’t give them full faith and credit. Although, I would have to research oil depletion allowances as I’m not up on their purpose and impact.
@JKB:
My point is that you singled out liberals, yet we all know that conservative politician are just as likely to support protective measure when companies in their states and districts will be affected negatively by so-called “free markets.”
@JKB:
Just be aware that you are taking on global trade agreements, and not something Obama thought up in the shower one morning:
“Chinese competitors flooding Europe and the U.S. with cut-price solar panels in breach of global trade rules.”
Gah! This guy cannot possibly be in “the 40% tax bracket.” There is no such thing. What else is he stretching the truth on?
@al-Ameda:
Sure, ask why we can’t buy cane sugar at world prices.
Sugar Tariffs Cost Americans $3.86 Billion in 2011
@john personna:
Exactly, and the list of commodities that are subject to subsidies and tariffs goes on forever.
Sometimes “free markets” are not free.
@john personna:
It’s only alluded to obliquely in the post you cited but the reason we can’t buy sugar at world prices is our outdated and wrongheaded no-trade policy with Cuba. We won’t buy Cuban sugar and we subsidize our own sugar growers, with devastating environmental consequences, to compete.
There are other examples, e.g. our cotton subsidies which hurt African farmers and our corn subsidies which hurt just about everybody.
See that “at the behest of major U.S. solar companies”? For those who can read, it means that multiple U.S. solar companies other than Keith asked for and support this policy, and feel that it helps them withstand unfair Chinese competition. So if the Obama administration had not adopted the policy, CNN would now be doing a breathless report on how “Obama’s lack of solar panel tariffs threaten to destroy American businesses.”
Any industrial policy of any sort will produce winners and losers. There’s simply no avoiding it.
Now I’m generally in favor of free trade, but ” Free Trade Always Works” sounds more like religious dogma than empirical analysis. Lets not forget that tariffs were used to protect nascent US industry during the 19th century.
@Rafer Janders:
May was the date of the dumping case. Someone is misleading you:
Shift by U.S. Muddles Solar Imports Case (May 16, 2012)
@Dave Schuler:
As I understand it, even where we have “free trade” we pay different tariffs on raw cotton, cotton fabric, and cotton t-shirts.
I would much prefer a uniform tariff on all goods, or as close as we can get to that over time.
(I actually think uniform tariffs are more important than what we now call “free trade,” that is, pushing down the base rate on some set of uncontested goods. T-shirts and bulk oil should pay the same rate. That’s the Hayekian in me.)
The idea that Republicans are always in favor of free trade and the Democrats are always protectionist is completely bogus , as any search of the Internet would quickly show. What’s more, the current Republicans are fiercely opposed to the free movement of labor across US borders, as has been pointed out above.
Now does it make sense for the US to protect the nascent domestic solar panel manufacturing industry for a certain time? Its not a crazy idea. Similar things have been done in the past, by both Democratic and Republican Administrations.
While it might be unfortunate that this guy suffers, every government policy has winners and losers. That’s not a reason for the government to pursue a particular policy.
I wonder if Doug would have this cheery attitude toward free trade if China and India offered legal services that competed with the ones Doug offers?
The market for legal services is NOT a free market.
@al-Ameda:
Sometimes “free markets” are not free
Michelle Bachman’s husband get’s government subsidies for his business. I guess I missed the furor on the right over the government “picking winners” in his case.
So we come full circle back to a big picture economic issue. Unrestricted dumping and the cheap Yuan strong Dollar regime creates a lucrative arbitgrage on the manufacturing plant and eqptmt where the stuff is worth pennies on the dollar in the distressed US manufacturing environment but is quite valuable when packed up and shipped off to China.
One of the two candidates has an extensive background in pulling off these deals without leaving a penny on the table.
Drats! The edit button is gone again 🙁
@stonetools:
A lot more than it used to be. Legal work is being offshored to India. Add automated document processing and it’s pretty easy to understand why nearly half of new law graduates haven’t gotten jobs in law nine months after graduation.
@Dave Schuler:
We have those stories about para-legals being replace by automation as well. Document dumps are no longer human-read, but instead computer searched.
Yeah! Let’s put tariff’s on anything you can purchase abroad! Why should Americans be able to buy anything overseas that can be purchased at home? especially trifles like solar panels, that might save humanity from heat death extinction?
(just kidding)
@apetra:
Why don’t we put a tariff on Mid East oil to pay for Mid East wars?
(just kidding)
‘See that “at the behest of major U.S. solar companies”?’
Yes rafer, I see that.
Large corporations LOVE regulations… that they can cover the cost and requirements of (like documenting the micromanagement of the production cycle) while crushing smaller businesses in the dust as they can’t cover the costs and compete.
Can you explain why helping large corporations to crush smaller businesses with Government regulations is a desirable outcome?
” the owner of the Hong Kong company that customizes his solar cells has stated in an affadavit that it buys the cells from the United States, Taiwan and Germany. But Keith worries that testimony won’t be good enough.
…
Unless he can show specific manufacturing documentation by August 29, Keith said he could be fined as much as 250 percent on his solar panels”
I’m sure GE can cover the costs to prove their panels are from where they’re from, and paying that small percentage of their total to make certain that NOBODY can afford to start up new competition against them definitely helps them.
How does it help the nation, the economy, or anyone other than GE to work toward a government support of monopolies?
Large corporations often lobby FOR costly regulations for just this reason… why do you think this is beneficial again?
@ertdfg:
The way dumping laws have always worked is that the injured party brings a complaint to the US trade boards. Small companies do this was well.
@rudderpedals:
the purpose of this article was to hit Romney … nothing more …
@stonetools:
the GOP supports legal immigration … what are you talking about ?
@Liberty60:
that is a wonderful theory … there are no perfectly free markets so lets have no free markets I guess …
nice way to smear someone calling for free markets by implying that they must have some ulterior personal financial motive for their stance …
I love it when academics wander out into the real world …
When China heavily subsidizes a solar panel, that isn’t free trade. It’s the equivalent of the Chinese Communist Party declaring U.S. made competitor products will become more expensive and less competitive.
We’ve been in a trade war for decades, one where the United States doesn’t fight back and allows its GDP growth to be drained to stimulate growth in other countries.
@Nikki: “One can infer” something the writer doesn’t even hint at? Is there a definition of “infer” that means “I’ll imagine any damn thing if I can twist the speaker’s words into something that serves my cause?”
I had solar panels installed this summer.
The company that did it use to import their panels from China.
But they very easily found replacement supplies from Brazil at prices only a little higher than they had been paying for Chinese panels. They did not have to raise their domestic prices.
I wonder if this business man tried to find other sources for his solar panels.
I’m sorry that Mr. Keith has tried to make a product that’s “green” and has been thrown under the bus by Obama. It’s really crowded under there, to be sure. But everything Obama touches turns to crap.
Further, let’s look at the financials: Mr. Keith’s SunRise solar powered roof vent sells on Amazon for somewhere between $489 and $650, depending on model.
I was attracted to a similar solar powered roof vent shopping at Costco. They wanted $300 for their version. (It’s probably fully made in China and therefore way cheaper.)
I went to Home Depot and bought a simple, thermostatically controlled AC-powered roof vent for $77. As I had readily available power in the attic, installation was a cinch. Had to cut the same hole in the roof and seal it just the same.
My AC-powered fan turns on when the attic hits 100 degrees Fahrenheit and runs on even the hottest days for about one minute, maybe two, and often less until the attic air temp drops to 100 degrees. The wattage load added to my electric bill is invisible. The fan simply does not run long enough to make a dent. The fact that I have a large hole in the roof that lets hot air out and naturally draws in cooler air from below is no doubt a major factor. At the moment it’s 1:00 PM and officially 77 degrees outside and somewhere between 88 and 94 degrees in the attic. Fan is not running.
The point is, this phony solar technology —
– is 700% more costly than a simple AC fan and a thermostat
– plays on people’s guilt for using electricity while actually polluting more due to the exotic crap that goes into making solar panels
– is funded by a 30% federal tax credit (meaning the government goes into more debt and/or takes money from other taxpayers)
– still needs auxiliary AC so it can run when the sun is insufficient
– will NEVER recover its cost in saved electricity
– cannot run as powerfully as an AC-powered motor
– has an unknown service life (my experience with solar panels is that of disappointment. Many simply don’t work that well or that long.)
Now I realize Obama is playing favorites here and poor Mr. Keith is the loser for it, but it’s what Obama has done his whole life. You lie down with dogs, you get up with fleas. He pays off his supporters with public money and crushes his adversaries. Today’s darling is tomorrow’s discard.
My points are:
– there is little need for solar anything, especially when it’s my tax money footing the rebate
– Obama cannot be trusted to know anything. He’s never had a job in his life and has no idea how stuff is made, how a business makes money or how the American economy works.
@JeffC: It’s unintended collateral damage from a much broader disdain for protectionism. I didn’t read the art as an attack on Romney, Doug’s writings reflect devotion to small l libertarian basics including removal of barriers to trade, and he’s consistent and genuine.
@Koblog:
Actually, I agree with your engineering analysis that an AC-powered roof fan is the win. I have a Kill-A-Watt monitor (best $20 a curious person can spend), and have used it to slash my electricity usage. Efficiency is much cheaper than solar.
But read above on dumping law. “Obama” did not play favorites.
Key line from above: “Keith denies that any of part of his solar fans are produced in China, but he admits he can’t totally prove it.”
You mean to tell me that “Keith” does not have complete traceability for his product? He cannot prove up where every component was manufactured (and on what day)? That in and of itself is reason why this story stinks.
It is easy to avoid the tariff; make the product in your own plant in the United States. If you cannot do that, you deserve to fail. I have no sympathy for this man.
he went about it all wrong, should have just put a massive business plan together- got loans from the energy dept.- donate money to obamas campaign- go bankrupt. oh, it’s been done already, too late….
he probably didn’t build it anyway.
@JeffC:
If you don’t want people to point out that free markets are an impossibility, then stop waving the banner of “free markets”.
Every marketplace is and always has been regulated, taxed, and distorted.
There are perfectly lucid argumetns for greater or lesser tariffs or taxes, greater or lesser regulation.
But an appeal to “free markets” is as nonsensical as an appeal to a “free lunch”.
There is a program that shows the average person how to make their own solar panels from materials available at the local home improvement stores and using simple hand tools. It will save 50-75% each month on power bills. The site is power 4 home. Also, check out the you tube videos on making solar panels.
The guy produced propaganda for Obama. As a small business owner myself I have absolutely no sympathy for him. He consorted with the enemy and got what he deserved.
The same thing happened with Gibson Guitars. They were stupid enough to support a bunch of laws that made it difficult to get the wood for their guitars because they thought it would prove a barrier to entry for their competition and it would buy them goodwill with the ecotards on Capitol Hill. Turns out their competition gives more to the party in power so they get the benefits of the cronyism that is our new economic philosophy instead of Gibson.
Supposedly, if they would only let the Indians sand the little blocks of wood they buy instead of people in Tennessee then everything would have been OK.. even though all the guitar makers use the same little blocks. We have $16 trillion in debt and $200 trillion in unfunded mandates but there is ALWAYS money available for the government to run people out of business… or to buy perfectly good used cars from people and destroy them… or to do any number of completely asinine things such as restructuring 1/6th of the US economy without even bothering to read what is being voted upon.
We have the dumbest and most useless ruling class since Roman times.
@BR549:
Do people who complain about Gibson just not know that some tropical hardwoods are endangered?
He was an associate at a successful law firm for a number of years, I am pretty sure that is an actual job.
What is the deal on the right anyway – does the guy who posts the most ignorant statements get a free set of steak knives?
Ah. You mean the guys who conquored much of the know worldn and built the most advanced metropolis in the world when everybody else in Europe was trying to master building better huts?
Idiots, all of them.
Another set of steak knives on the way…
@BR549:
That’s very similar to the motto inscribed above the House Repubilan Chambers:
“We
haveare the dumbest and most useless ruling class since Roman times.”