Giving in to senators' protectionist impulse on clean-energy projects would be a job-killer: editorial
By The Plain Dealer Editorial Board
March 07, 2010, 4:23AM

News that sizable chunks of federal stimulus money designed to seed U.S. clean- energy projects have gone to foreign-owned companies -- and even to overseas plants -- has understandably upset members of Congress, including Ohio Sen. Sherrod Brown. But their call for buy-America restrictions and earmarks is a counterproductive job killer and a sure way to slam the brakes on the development of U.S. alternative energy -- even though it may play well, politically, in the short run.

Last week, Brown and three other Senate Democrats -- Charles Schumer of New York, Bob Casey of Pennsylvania and Jon Tester of Montana -- introduced legislation limiting stimulus dollars to projects that rely on parts made in America and that create a majority of jobs here. They also asked the Obama administration to stop funding green-power projects until those restrictions are in place.

To its credit, the administration shows no such inclination. The Energy Department has pushed back hard, arguing that grants may go to foreign-owned companies, but that most of the actual work is done in this country by American workers and that a growing share of the parts they use are made in the United States.

Officials also note that this relatively small slice of the $787 billion stimulus program is supposed to spur a domestic green-energy sector by priming demand -- not simply creating short-term jobs. That's a better use of stimulus money than most.

Even the stories from the Investigative Reporting Workshop at American University that triggered the congressional reaction pointed out that foreign firms have a significant head start in green-energy development.

In a global economy, working with foreign producers or technologies is often the quickest and most efficient way to jumpstart a new or emerging industrial sector in the United States. Many of Ohio's efforts to develop wind and solar power businesses involve partnerships with foreign companies -- a fact acknowledged by Gov. Ted Strickland, who opposes Brown's efforts.

In his State of the City speech Thursday, Cleveland Mayor Frank Jackson announced that a Chinese maker of low-energy, light-emitting diode (LED) products plans to make Cleveland its North American headquarters for manufacturing and research, creating 350 jobs.

You don't create a mutually beneficial relationship like that -- or the one between Ohio and Japan's Honda -- by building barriers to trade and investment. Even in hard times.

OCMA Response

After reading and carefully analyzing the PD Editorial Board’s column of March 7, 2010, concerning Senator Sherrod Brown’s commendable effort to stop stimulus dollars from funding the creation of manufacturing jobs in China and India, I can only surmise that the Board must be under a mistaken impression of the capability of U. S. manufacturers to meet the demand for components of wind energy turbines.

The editorial makes this curious statement: “working with foreign companies and technologies is often the quickest and most efficient way to jumpstart a new or emerging industrial sector in the United States.” The statement clearly suggests that wind energy component manufacturing capability in America is in its infancy. This could not be further from the truth. The fact of the matter is that foundries in Ohio, Michigan, Indiana, and Pennsylvania have been supplying these massive ductile iron castings to wind turbine manufacturers for nearly a decade.

The DOE stimulus grant program should have resulted in hundreds if not thousands of additional jobs to workers employed by the many U.S. foundries casting these components and the machine shops finishing these awe-inspiring components. Instead, a Southwestern Ohio foundry saw its wind energy casting business go from $1 million in 2008 to zero in 2009. An Indiana foundry that had made thousands of massive ductile iron frames for a major wind turbine manufacturer lost all of this business to China. This same foundry invested $10 million to purchase a dying foundry in Michigan, spent $17 million to refurbish the foundry to meet the requirements of wind turbine production, and produced wind turbine castings for a major manufacturer until they were abruptly told that this production was being moved to China. The Michigan foundry is now mothballed.

It was not a nascent U.S. industry that created this problem; it was the decision of the wind turbine industry to seek out the absolutely lowest possible price for these castings in China and India. In the case of Chinese castings, the price paid by the wind turbine manufacturers is so far below the actual cost of the casting, the foundry making the casting is surely operating at a loss. However, as we know, companies in China are not driven by profits, they are driven by employment. It is quite odd, that the DOE stimulus grant program helped Chinese manufacturers increase employment at the expense of American workers. At least with the “protection” provided by the Brown et al proposal, the wind energy projects that were being subsidized by American taxpayer funds would be made in America with American workers.

The issue here is not about protectionism. It is about using scarce U. S. taxpayer dollars in the most efficient manner possible to create jobs for Americans. If Senator Brown et al were trying to stop the wind turbine industry from choosing to buy foreign-made castings with private monies by imposing tariffs or prohibiting the use of foreign components, that would be protectionist. However, in this case we are not discussing private funds, indeed, we are talking about funds available under the American Recovery and Reinvestment Act of 2009. This hard-fought legislation was intended to provide stimulus to create American jobs. The PD editorial board would be hard-pressed to find even a small percentage of the American public that would think that using this money to create metal casting jobs in China and India is a good idea. In fact, it’s not clear whether a convention of American economists would support that idea!

The PD editorial compliments the Obama Administration and Department of Energy for pushing back against the Brown et al proposal reiterating DOE’s statement that “most of the actual work is done in this country by American workers and that a growing share of the parts they use are made in the United States.” It is not clear how the DOE is making this judgment, but there is almost no way that this statement can be true! The labor-intensive manufacturing process for casting the large ductile iron hubs, frames, and gearboxes that create the wind turbine as well as the blades that complete the windmill employs hundreds of workers. The construction of a windmill farm may employ a few hundred construction workers temporarily and a couple of maintenance employees permanently. As outlined above, it is clear that “a growing share of the parts” is not being made in America. The DOE statement is an effort to deflect criticism: it is not truthful. If Governor Strickland was aware of these facts, he may not be so adamant in his opposition to Senator Brown’s efforts.

Finally, I cannot resist responding to the PD editorial board comments about the Chinese LED manufacturer. To suggest that the U.S. is going to benefit overall from Chinese companies building manufacturing capacity in the U. S. is laughable. After squeezing American manufacturers with predatory pricing, currency manipulation, and government subsidies of Chinese exports for the past decade, millions of Americans have lost their jobs to this unfair competition. To suggest that 350 jobs in Cleveland begin to balance this equation is irresponsible and naive. If we cannot agree that U.S. taxpayer monies should be used to create U.S. manufacturing jobs, we are in much greater danger of losing our manufacturing “soul” than I ever imagined.

Russ Murray
Executive Director
Ohio Cast Metals Association (OCMA)

 

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