Clean Technology, China and the Trade Deficit
The following chart tells you everything you need to know about the United States’ trading relationship with China on green technology, an issue that you’ll be hearing about a lot during the next several months.
The chart, included in an Economic Policy Institute primer on the issue, illustrates the United States’ massive trade deficit with China on clean energy technology, a deficit that estimates indicate has more than doubled in the last two years. The Economic Policy Institute put it this way:
Overall, imports of clean energy products increased 74% per year, on average, between 2000 and 2010. U.S. exports also increased very rapidly, but from a tiny base. As a result, the U.S. developed large and very rapidly growing trade deficits with China in clean energy products.
It’s this trade deficit with China that’s got the United Steelworkers all worked up. The Steelworkers are concerned that China is going to leave the United States in the dust and the union is hoping it can stop China before it’s too late. In a 5,000-page-plus petition to the Obama administration, the union alleges that China is breaking a number of World Trade Organization rules by subsidizing key energy technology exports, among other things.
The Obama administration announced last week that it’s investigating the Steelworkers’ allegations. In the next 90 days, the administration (led by United States Trade Representative Ron Kirk) will decide whether to bring a trade case before the WTO.
As I noted earlier today, the announcement has already led to heightened tension between the U.S. and China. A Chinese official accused the administration of trying to score political points ahead of the midterm elections (It’s not clear whether it was the administration’s intent, but the announcement was popular on both sides of the aisle). And today, The New York Times reported that China is blocking shipments to the United States of rare earth minerals necessary in the manufacturing of key clean energy technologies.
But challenging China’s trade policies is just one way to ensure that the United States can compete on the world stage. Without the right policies, economists say it will be nearly impossible to develop the so-called “clean energy” economy that President Obama and others have been touting for years. At the end of the day, the United States imports so many components for clean energy technology not just because it’s so cheap to buy them from China and other countries, but also because the U.S. clean energy manufacturing sector is underdeveloped.