Gaining a competitive advantage in clean energy has become a strategic focal point for governments and economic, energy, and trade policymakers around the world. Amidst the backdrop of a slow, fragile recovery from the near collapse of the banking system and recession of 2008-2009, international trade disputes and protectionism have accompanied such developments.
Trade in clean energy goods and services between China and the US amounted to more than $8.5 billion in 2011 — the latest year for which data is available — with US clean energy exports to China exceeding imports by some $1.63 billion, according to a new study from The Pew Charitable Trusts released March 6.
Though China’s clean energy industry has an advantage in large-scale manufacturing and high-volume assembly of some clean energy products, US leadership in innovation and entrepreneurship, along with the global presence of US businesses, have been decisive factors tipping the balance of trade in clean energy goods and services in the US’ favor, according to Pew’s Advantage America: The US-China Clean Energy Trade Relationship in 2011.
Gaining a Competitive Advantage in Clean Energy
Efforts to gain a competitive advantage in international trade of solar photovoltaic (PV) and wind energy raw materials, equipment, and technology have moved to the forefront of international politics, domestic economic, and international trade policy in recent years, as national governments vie to gain as large a share as possible of rapidly growing worldwide renewable energy and clean technology markets.
“The report findings underscore the long-term economic potential for US leadership in the clean energy sector,” Phyllis Cuttino, director of Pew’s clean energy program, was quoted in a Pew press release. Advantage America demonstrates the pay-off for our leadership in wind, solar, and energy smart technology innovation.
“U.S. companies are tapping into the growing worldwide demand for clean energy goods and services. But, to maintain our competitive edge, it is essential that policymakers recognize and enhance domestic policies that help position U.S. companies for success—investing in research and development, encouraging domestic demand, and supporting overseas sales.”
Based on the latest available data and compiled by Bloomberg New Energy Finance, the Pew report’s assessment of the US-China balance of trade and clean energy goods and services pre-dates the imposition of import duties and countervailing duty margins on Chinese-made crystalline silicon solar PV cells and panels.
Clean Energy Trade Tensions Flare Up Amid Efforts to Gain Competitive Advantage
International trade and policy disputes over clean energy have flared up alongside national governments’ initiatives to boost development and growth of clean energy industries, markets, and trade. The number of World Trade Organization (WTO) trade disputes involving international trade in renewable energy raw materials, equipment, and technology has been on the rise. The world’s largest economies and most populous nations – China, the European Union (EU), India and the US – are all currently embroiled in WTO trade cases involving renewable energy.
The Obama Administration has taken a more proactive, aggressive policy stance when it comes to clean energy trade relations with China than previous administrations. US renewable energy industry participants, meanwhile, have petitioned successfully the Coalition for American Solar Manufacturing (CASM) and the US Department of Commerce and International Trade Commission to impose WTO import duties on Chinese-made crystalline silicon solar photovoltaic (PV) cells and panels.
There’s a litany of international trade disputes pending and recently decided among the world’s largest economies and trading partners. Chinese government and industry, for their part, have been considering imposing WTO import duties on US-made solar-grade polysilicon and manufacturing equipment.
Benefiting from a virtual monopoly in the world market for rare earth metals, the Chinese government clamped down on rare earth exports by establishing a quota system. Facing WTO petitions seeking redress, the China’s Ministry of Commerce tightened the export quota further last December, cutting exports by 27% for the first half of 2013.
China and the US: The Clean Energy Balance of Trade
Advantage America “provides insight into the complex and interdependent nature of trade between the world’s two largest economies,” Pew explains. Key takeaways of the report include:
- Solar Energy—These products constituted the largest component of clean energy trade for both countries. Combined, firms based in the two nations traded more than $6.5 billion worth of products and services in 2011. Chinese firms sell large quantities of finished solar cells and modules to the United States, which led in sales of high value-added goods and services, such as polysilicon and wafers, as well as the high-tech materials and equipment needed in solar manufacturing. On a net basis, the United States enjoyed a $913 million surplus in the solar sector.
- Wind Energy—This was the smallest of the three clean energy trade sectors examined in the report. Overall, more than $923 million worth of wind energy goods and services were exchanged between the two countries in 2011. As with solar, the U.S. wind industry excels in sales of relatively high-margin specialty materials (fiberglass) and sensitive electronic and other control systems. China’s largest sales were in turbine towers and rotors. Overall, U.S. firms held a net trade surplus of just over $146 million.
- Energy Smart Technologies—This sector includes a suite of technologies, services, and products that can help improve energy performance and/or efficiency, store energy, and reduce carbon emissions. Energy smart technologies traded between the United States and China include smart meters, light emitting diodes (LEDs), advanced lithium-ion batteries, and electric vehicles. More than $1.1 billion worth of these products flowed between the two countries, with the United States held a net trade surplus of $571 million in the sector.
The report authors go on to conclude that:
- The United States held a $1.63 billion trade advantage over China in 2011 across the three sectors. The United States enjoyed a surplus in all three major clean energy sectors, with solar energy accounting for 56 percent of the overall advantage and energy smart technologies accounting for 35 percent of the surplus.
- U.S. firms have an advantage based on national leadership in innovation and entrepreneurship. U.S. companies excel in production and sale of complex, high-margin, and performance-critical goods. They include capital equipment for manufacturing solar panels and LEDs, specialty chemicals and materials needed for production of solar and wind products, and controls for energy systems.
- U.S. companies are more active overseas than their Chinese counterparts, which have only small U.S. assembly operations for clean energy equipment. The U.S. trade advantage over China increased by more than $1.1 billion (to a total of $1.63 billion) when the global footprints of U.S. firms manufacturing products overseas were taken into account.
- China’s strength is based on large-scale assembly and high-volume manufacturing. The data show that Chinese firms are relied upon for large-scale manufacture and high-volume assembly of finished products such as solar modules and LED fixtures.
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