See which industries will feel the most pain from a China-U.S. trade war
At night, the REC Silicon plant in Moses Lake lights up the sky for miles around. Although it’s not well known to people west of the mountains, the chemical refinery is a big-time generator of economic activity for the region and the state, representing hundreds of jobs and billions of dollars in investment.
At least it used to. REC Silicon could in the coming weeks be transformed into a well-illuminated collection of metal pipe, a representative not so much of economic potential as potential thwarted by protracted and messy trade disputes.
We are a divided nation, and nowhere more so than on trade. The divisions do not occur along neat fault lines like left-right, GOP-Dems, east-west, north-south, urban-rural, business-labor or industrial-new economy.
Instead there are at least three distinct divisions on the trade issue, and there are divisions within those divisions. All of them, however, are represented in Washington.
There is the philosophical school that argues for unfettered trade, regardless of what else is going on in the world. If the United States loses a market or a domestic industry due to competition from imports or from markets closed off abroad, a dynamic economy will generate jobs, companies, industries and technologies to replace them. Placing restrictions through tariffs, punitive duties and the like ultimately costs the consumer in the form of higher prices, and the economy in the form of restraints on innovation.
The polar opposite to that is fully managed trade, whose supporters argue that preservation of American jobs and prosperity is paramount, and if that means employing whatever tools are available to accomplish that, have at it. Protectionism is a good thing; industries lost don’t come back and often aren’t replaced, at least not for those who lost their jobs to imports. Cheap stuff isn’t of much value to those who have no income because they have no job.
In between is a vast swath of Americans who might identify with one or the other ideological outposts, but in the complicated real world favor a mix of approaches, however inconsistent that might be.
The problem with that more pragmatic, if philosophically impure, approach to trade is deciding who gets the protection and which sectors are left to fight for themselves, not to mention what happens when seeming bystanders get dragged into the fray.
What happens is the REC Silicon case. The company’s Moses Lake plant produces polysilicon, a material used to make electricity-producing solar cells.
REC Silicon’s involvement stems from action the United States took against imports of Chinese-made solar panels; a dramatic slump in the cost of those panels devastated American producers (including two in this state). That’s bad news for those who worked for those companies, but cheaper prices for solar energy were a good deal for homeowners wanting to install some panels.
In the meantime, China retaliated with tariff hikes on polysilicon imports which hits, you got it, REC Silicon. The plant has been operating at 25 percent of capacity for months. Now the company says that if China and the United States reach a trade agreement soon — like, really soon — it will restore Moses Lake to full production.
No deal? Full shutdown by June 30.
Miracles do happen. But trade relations between the United States and China at the time this column was written were strained — whoops, change that, now we’re talking again — and given the breadth and depth of issues and products and services about which the countries have differences — uh oh, now we’re back to flinging threats of higher tariffs at one another — to expect a quick resolution in time to save Moses Lake or Washington farmers and manufacturers is to expect the miraculous.
The solar dispute, for example, has stretched on for years. Other disputes, such as softwood lumber or dueling subsidies for Boeing and Airbus, can be measured in decades. The American unhappiness with China over low-cost import competition, technology theft, intellectual property rights, industrial espionage and cybersecurity is getting up there in years.
Trade should be a major issue for the candidates in the 2020 election. That it might not be can be blamed on how tricky the issue is for politicians. Which splinter of the American public do they align with on trade policy to get votes, and how many votes do they sacrifice by not doing so?
For example, beating up on the tech giants is popular around the world, with calls to restrain their ability to operate or even break them up on competitive and privacy grounds. European political leaders and regulators are especially keen to take a whack at American tech companies, and they’d probably get a few nods of agreement and sympathy from American voters.
But how about those voters working for or supported by those tech companies? What about the lovely campaign contributions that might emanate from a tech company? Who’d like to say no to that?
How about those caught in the retaliatory strikes and counterattacks? Who gets support, and who gets told, “Sorry, sacrifices must be made for the greater good?”
The likeliest scenario is that candidates will do what they’ve always done — be as many things to as many people as they can be for as long as they can get away with it and hope the disputes get resolved or fade away without having to take an actual position. Then REC Silicon can go back to producing what it does, instead of settling into the role it’s been thrust into — acting as a cautionary case study for what happens when trade disputes fester and grow.