Guest contribution by Leigh Ewbank
On the heels of filing a complaint with the WTO against China’s subsidies for its domestic wind turbine manufacturers, President Obama signed an appropriations law that requires the Department of Defense to purchase American-made solar panels. The move appears to be the first instance of America leveraging its WTO complaint to boost its clean technology industry, and shows that the US is beginning to take clean energy competitiveness seriously.
Some will argue that the ‘buy American’ provision smacks of hypocrisy—that the administration is as guilty of the same behavior it has criticized China for. Others will argue that the measure counters the Chinese subsidies and is a legitimate way to bolster the US clean energy sector in an uneven playing field. Regardless of your position on the matter, the move shines a spotlight on the role of military procurement.
Mandating the Defense Department to purchase of ‘American made’ solar panels is likely to comply with international trade rules. Article XXI of the General Agreement on Tariffs and Trade 1994 stipulates that military procurement is excempted from rules designed to prevent preferential treatment of local industries and trade protectionism. While the US government’s preference for US-made photovoltaic cells might anger China and other nations with a stake in the global solar market, there is little recourse for them.
Military procurement serves an important purpose in the domestic political environment beyond its ability to circumvent WTO rules. Key Republicans serving on defense-related committees—Rep. Todd Akin (R-MO), Buck McKeon (R-CA), and Rep. Randy Forbes (R-VA)—have all shown an unwillingness to cut the national defense budget, even marginally. Defense purchases allow the US government to invest in the nascent clean tech sector and escape the wrath of the deficit-obsessed conservatives.
The ‘buy American’ provision taps the US military’s good track record of bringing down the costs of new technologies. As the Breakthrough Institute points out in “Where Good Technologies Come From”, the Department of Defense’s sustained demand for microchips resulted in dramatic cost reductions.
NASA’s procurement of the purpose-built Apollo Guidance Computer microchips during the space race of the 1960s had a similar impact. NASA’s appetite for microchips was so large that manufacturers “…were able to achieve huge improvements in the production process, driving the price of the Apollo microchip down from $1000 per unit to between $20 and $30 per unit in the span of a few years.”
Comparable cost reductions could potentially be achieved for solar PV, in which case American’s would have a more energy independent military, as well as the spillover benefits of cheaper photovoltaic cells and a rejuvenated manufacturing sector.
DOD procurement of clean energy technologies might also be used to pilot the ‘competitive deployment’ policies outlined in the joint Breakthrough/Brookings/AEI report Post Partisan Power. Such an approach aims not only to drive deployment of existing technologies, but also to drive technological innovation and steady reductions in the price of clean energy technologies as they are deployed. This model harnesses America’s strength as a high-tech innovation powerhouse and seeks to create a virtuous cycle for achieving ever cheaper clean energy.
After much inaction America has recently made some swift moves in the clean energy race. How will China respond?
See also: “A New Energy Economics and Security Consensus” By Daniel Goldfarb