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Give outsourcing a chance

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The Obama administration and its allies have a dilemma: They want Americans to adopt renewable energy, but they don't want anyone other than U.S. manufacturers to make the equipment. That's a problem when it comes to solar power. China makes the cheapest panels, and U.S. consumers have been snatching them up. That's the key reason why federally backed companies like Solyndra have failed.

A statement last month from Sen. Sherrod Brown, D-Ohio, is representative of the twisted logic behind the green protectionists' crusade: "We can't trade our dependence on foreign oil for a dependence on Chinese-made solar panels."

The administration and its allies have tried everything from subsidizing domestic companies to slapping import duties on Chinese products. Last week, China responded by announcing it was opening anti-dumping and anti-subsidy probes against the U.S.

Here's a better solution: Let China win this trade battle. It will be better for consumers, better for taxpayers, better for the cause of green energy and better for -- yes, seriously -- the domestic solar industry.

If China has a comparative advantage in making solar panels, let China take advantage of it. Let the jobs be outsourced. We will benefit in other ways.

A little background here: One of the administration's few successes in renewable energy policy has been to subsidize the purchase of solar panels. That, coupled with low prices and state-level subsidies, has set off a boom. The Solar Energy Industries Association, the leading trade group, reports that new solar installations grew 85 percent in he first quarter of this year, above the 66 percent year-over-year growth in the same quarter last year.

You'd think the administration would be happy with all those new green energy consumers. Instead it has fretted that domestic manufacturers cannot compete despite lavish subsidies.

Solyndra's ill-fated $535 million federal loan guarantee was only the biggest flop. That was followed by Abound Solar ($70 million), Beacon Power ($43 million) and Amonix ($22 million).

The administration has blamed China for allegedly manipulating its currency and slapped 35 percent import duties on its solar equipment. But a fact often overlooked by policymakers is that manufacturing isn't the only part of the domestic solar industry. It isn't even the biggest part.

There are 1,275 solar manufacturers employing about 24,000 people in the country, according to a study of 2011 census data by the Solar Foundation, SEIA's research arm.

The same study found there are 10,304 companies employing more than 52,500 people involved in solar installation, as well as 4,354 sales and distribution companies employing about 17,700. About 7,000 others work in related fields like research. Manufacturing represents only about one of every four solar energy-related jobs. The other areas, meanwhile, have been growing faster thanks to those cheaper foreign panels.

The trade fight has bitterly divided the industry. The case for fighting against China has been driven mainly by the company SolarWorld, which organized the Coalition for American Solar Manufacturing. The rival Coalition for Affordable Solar Energy, which includes mostly installers, warns that a trade battle will harm more companies than it helps.

Might not the tariffs at least revive domestic manufacturing? Er, maybe not. Even if China can be frozen out, there is plenty of other competition out there.

As John Smirnow, SEIA vice president for trade and competitiveness, notes: "While China is the largest supplier, there are a lot of other countries making solar modules. It is going to be relatively easy for other countries to start directing their products to the U.S."

So, the administration has locked itself into a costly, losing battle. Even if he somehow won, Obama would succeed mainly in raising the price of solar panels. There is no light at the end of this tunnel.

Sean Higgins (shiggins@washingtonexaminer.com) is a senior editorial writer for The Washington Examiner. Follow him on Twitter at @seanghiggins.

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Sean Higgins

Senior Writer
The Washington Examiner