Groups concerned about the environment have long been skeptical of trade liberalization. From what I understand, they view pollution and the depletion of natural resources as the inevitable consequences of unregulated economic growth. But what if that growth is driven by trade in environmentally friendly products? Is trade still bad then? Apparently so.
The United States has attracted negative attention from a number of environmentalists by bringing a formal challenge at the World Trade Organization against Indian trade barriers on solar panels. India provides subsidies to developers of solar power plants only if they purchase solar cells from Indian manufacturers. This is called a “local‐content requirement” and such schemes are generally illegal under WTO rules.
It seems to me that these groups should be skeptical of the Indian program and supportive of the U.S. challenge. Making it more difficult to use imported solar cells just makes it more difficult to build solar power plants. The policy benefits the domestic manufacturers of these solar panels, but it burdens the purchasers. The burden is there even if the plants purchase domestic panels, because the now‐less‐accessible foreign panels were presumably a better value.
If the Sierra Club and Greenpeace want people to buy more solar panels, then open markets for those panels is the best policy. The only reason I can see why they would oppose free trade in solar panels is because they want every country in the world to promote “green jobs” as part of an environmentally conscious industrial policy. If that is their prefered policy then these groups should probably advocate for transparent restrictions like tariffs and quotas instead of local‐content requirements. But the fact is that industrial policy and protectionism are just as bad for solar panels as they are for steel or clothing or sugar. Industrial policy promotes rent‐seeking and entrenches inefficiencies. If you truly love solar panels, then you must set them free.
