Source: Blog – Alliance for American Manufacturing
President Biden speaks at an Aug. 16 White House event celebrating the anniversary of the Inflation Reduction Act. Screengrab via YouTube
As the historic piece of industrial policy celebrates is one-year anniversary, it’s important to remember that there’s a whole lot of work left to be done — and the U.S. must remain vigilant against trade cheating.
The White House held a reception on Wednesday afternoon to celebrate the official one-year anniversary of the signing of the Inflation Reduction Act (IRA), the historic legislation that has spurred $110 billion worth of investments in clean energy facilities across the country.
Indeed, there’s a lot worth celebrating about the IRA. As I wrote about last week, the IRA led to a resurgence in domestic solar manufacturing that many believed was not possible. Advocacy organization Climate Power reports that there have been more 170,000 jobs announced thanks to the climate provisions in the IRA. The benefits are coming to folks across the country, with 24 projects announced in Michigan, 22 in Georgia, 20 in South Carolina, 16 in California and 14 in Texas.
We’re pretty pumped about the IRA and its early success. AAM President Scott Paul noted that the industrial policy has “supercharged our factories as they develop the products and materials we need for a cleaner future.” The law also has quieted some of the naysayers who once said America would never return to an industrial policy — or worse, that industrial policy couldn’t work.
But this is the part where we also caution that now is not the time to pop the champagne and take a victory lap. We’re still well behind China in the clean energy race, after all — and the rest of the world isn’t preparing to slow down, either.
Here are just some of the big ways the implementation of the IRA could go wrong, and what the United States needs to do to avoid them.
No. 1: The U.S. Defunds the IRA
This is probably the most apparent challenge, since there’s already a big campaign underway by opponents of the IRA to defund it. GOP leaders have also taken steps to end tax credits to expand clean energy production, which might be a sign of things to come should Republicans retake the White House and/or Senate in the next election.
Suffice to say, the United States shouldn’t do this. The IRA did what it was supposed to do and is giving the United States a big boost in its competition with China. Given the increasingly hawkish stance of the GOP presidential nominees, supporting the IRA should really be a given. Plus, Republican Members of Congress have seen big benefits in their own districts thanks to the new law, something Biden has taken to mentioning.
No. 2: Domestic Content Requirements are Weak or Go Unenforced
The Inflation Reduction Act — along with similar pieces of industrial policy like the Bipartisan Infrastructure Law and CHIPS and Science Act — covers a lot of ground. It will be up to various federal agencies to actually implement the law, and that includes providing guidance on domestic content requirements and then enforcing them.
We’ve seen too often what happens when agencies don’t uphold domestic content requirements or use waivers and other means to weaken them. This not only provides a taxpayer-funded handout to companies manufacturing clean energy materials overseas, it also undercuts the U.S. factory workers and companies who are working hard to build this critical manufacturing here at home. And again, we’ll bring up national security here — millions of dollars from the Paycheck Protection Program that was meant to keep U.S. businesses afloat during the pandemic ended up in China. It is pretty likely Chinese leaders would like to benefit from U.S. investment funding now.
Strict domestic content requirements and enforcement will be key in maximizing the benefits of the IRA, and ensuring that U.S. workers, manufacturers, and communities are the ones who benefit the most.
No. 3: Failing to Enforce Our Trade Laws
The past year has been exciting for U.S. clean energy manufacturing, but we’ve been here before. At the turn of the 21st century, the United States looked poised to dominate the sector, and there was bipartisan support for doing so. Former Presidents George W. Bush and Barack Obama both prioritized growth of solar manufacturing, and at one point there were 75 major solar parts factories in the United States — and U.S. made 22% of the world’s supply solar panels. Today, we make 1%.
So what went wrong? China got in the game — and the United States sat on its hands.
China implemented a massive coordinated plan to dominate the global solar sector, and they used a whole lot of unfair practices to get there. As I wrote in 2021: “China employed a mix of massive government subsidies, lax environmental standards, and even forced labor practices to make its solar panels. It also built up its domestic solar supply chain and kept coal plants open to supply cheap electricity to make the new equipment (which sort of defeats the purpose, don’t you think?).”
China then dumped a whole lot of cheap solar products into the U.S. market, putting American companies out of business. The United States was too slow to respond. Obama finally issued tariffs in 2012, which led China to ship its solar panels through third-party countries. Former President Donald Trump issued tariffs in 2018, and China did the same thing.
In summer 2022, the Biden administration made the mistake of issuing a two-year pause in solar tariffs, arguing imports were needed to help the U.S. meet its climate goals while domestic industry ramped up.
Well, now the United States is ramping things up, and the United States can’t continue to be our own worst enemy. We simply must enforce our trade laws and take quick action when trade cheating is discovered. On top of that, lawmakers also should pass the Leveling the Playing Field Act 2.0, which would provide new tools to help take on trade offenders.
And when that two-year tariff pause ends, Biden should let it expire for good.
No. 4: The U.S. Fails to Implement More Industrial Policy
Even if the United States doesn’t end up cutting any of the funding included in the IRA, it’s not enough. As our Scott Paul likes to say, the IRA should be the first step, not the last word. Because while the law is spurring new investment in sectors like solar and wind, there are a whole lot of industries in which the United States remains woefully dependent on China and other foreign countries for the things we need.
Take pharmaceuticals and medical supplies. Or printed circuit boards, which are needed to power semiconductors. And don’t even get us started about the dangers lurking in our defense industrial supply chain, which remains heavily reliant on Chinese imports.
Because while at first glance pain medication and F-16 fighter jets may not have a lot in common with solar panels and wind turbines, it’s important to remember that manufacturing is an ecosystem. When manufacturing is present, the easier it is build more manufacturing and grow supply chains — and create new innovations. And the more manufacturing you have, the easier it is to shift gears in a crisis — and ramp up production to make what you need to meet that crisis.
So yes, let’s celebrate the 1st birthday of the Inflation Reduction Act. But let’s make sure that it is not a one-off thing that eventually will be forgotten. Instead, let’s aim to make it the start of something truly remarkable.
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