The Trade War on Drugs

Political and commercial tensions between the United States and China have been growing steadily for years. It is no secret that during the recent Trump administration this tension escalated to new heights. Rather than analyse the many reasons that led to this tension, not least the obvious differences in political ideologies and glaring ineptitude of one Commander in Chief. Let's look instead at how recent actions have had unintended consequences on seemingly unrelated phenomena. 

So what chain of events can we use to justify the statement made in the title of this story? To summarise quickly and plainly: 

A trade war breaks out when one country imposes tariffs on a good or goods being imported from another country, and that country retaliates by imposing their own set of tariffs on goods from the first country, and so on. This is a simplification but suitable enough for the purposes of this article -the escalation is the defining factor.

Tariffs are a normal and necessary part of global economics. They're a tax on the import of goods to encourage engagement with domestic businesses, and tariffs don't in themselves lead to trade wars. That said, it is normal for tariffs to be used as tools to fight a trade war, when the purpose of a tax is no longer to encourage domestic commerce but to discourage foreign commerce from a particular place. It is therefore fair to say that tariffs may be the cause of a trade war too, though not invariably.

In this particular case it is complicated to say the least, with economic, political, cultural and historical factors all playing a part. In short, the US has felt for a long time that they are buying more things from China than they are from them, creating an imbalance of trade. The simple explanation for this is supply and demand. The US has one of the largest consumerist economies in the world and China has the manufacturing power to rival it. Even before China joined the World Trade Organisation in December 2001 (a move which the US orchestrated believing it would be to their own advantage).

In this year, America dominated global trade, trading in greater volume than China in over 80% of all global countries. In 2018, this figure was less than 30%, while China surpassed the US in almost 70% of countries. In the last two decades China has firmly cemented itself as a powerhouse of manufacturing and trade in our collective consciousness, and America's concern has not been kept in the dark either.

During the Obama administration, actions were taken following a series of studies carried out by the US Department of Commerce in 2012. Their investigations discovered that several key industries, ones where the US had maintained a position of market dominance for years, had come under threat from Chinese manufacturers who were out-competing them. One of these industries was renewable energy, and more specifically solar power.

The Department of Commerce concluded that China was inundating US markets with government subsidised solar panels in a way that was threatening their own manufacturers. For years China has been accused of violating and skirting trade rules in this way. By heavily subsidising their own Chinese companies, the CCP (Communist Party of China) enables businesses to sell their goods at a price low enough to be considered anti-competitive by foreign companies. As a result, tariffs were imposed on Chinese solar panels and other PV (photovoltaic) equipment. 

Fast forward a few years to the Trump administration, when trade relations between the US and China worsened exponentially. The global solar energy industry began looking vastly different to what had been anticipated back in 2012. In January 2018, Trump imposed tariffs of 30% on imported solar panels to the US. Although initially there was some backlash from China, who appealed to the WTO, they had little effect except to drive the manufacturers to lower their costs and for the CCP to increase subsidies even further. Although the trade war is having a significant effect on Chinese PV supply, the sector is growing at a staggering rate thanks to global demand for renewable energy sources and the dramatic decrease in costs of production - two hugely positive steps forward for the clean energy industry as a whole that should not be sidelined. 

However, following further tariffs and sanctions imposed by the Trump administration, the ‘dumping’ of Chinese solar and PV’s began extending beyond the markets of North America and Europe, who previously were the only economies that could afford the interest in renewable energy. Despite the unpredictability of the US-China trade war, the demand for solar energy has continued to grow and costs have continuously fallen. Since 2010, the cost of solar panels has fallen 85% and continues to decrease, according to PV Magazine. Now even countries with the smallest economies can become targets for the Chinese solar industry - a beneficial outcome for everyone, but one with unexpected consequences.

You can see where this is going. The escalation of tensions between two of the biggest economies in the world, and the impact it has had on the availability and cost of renewable energy sources such as solar, has facilitated the expansion of agriculture away from the Helmand green zone, into areas that are less easily governed, policed, and often free to the first farmer to stake his claim.

The buying of solar panels, along with the other equipment needed to pump up ground water, has become a viable investment to an Afghan farmer. According to Dr David Mansfield, who is an expert academic of opium production in Afghanistan and a close associate of Alcis, the cost of solar equipment and installation is approximately $7000 (USD). This can usually be paid off within a few years, after which the costs for water are essentially zero. The vast majority of these farmers are not seeking to produce opium due to deliberate criminal intention. They want to provide a better income for their families. Regardless of the motivations that lead to farming poppy, the introduction of cheap solar panels from China have made it possible to venture further and further into the desert in order to start growing and living. 

Alcis has closely monitored this agricultural expansion since 2004 using a combination of EO (Earth Observation), field surveying, and GIS (Geographic Information Systems). By studying satellite imagery and utilising machine learning we have monitored the exponential growth in the number of solar panels across the country, as well as the individual reservoirs created by each farmer from pumping up groundwater.

Since the first report of an Afghan farmer using solar panels in 2013, it is now commonplace to find a domestic compound with PV equipment hooked up to a water pump. Alcis estimates that half a million people have migrated into the desert areas surrounding Helmand in the last five years alone. This estimate is backed up by NDVI as well as mapping solar panels, reservoirs and domestic compounds all observed using satellite imagery. NDVI (Normalised Difference Vegetation Index) is a method of remote sensing that enables us to measure crop health from space by isolating and manipulating different bands of electromagnetic spectrum, such as infrared and near-infrared light.

To demonstrate a few of these methods of monitoring, the map below has been fitted with an example of the reservoirs Alcis has located in both 2016 and 2019. These reservoirs indicate individual farming plots that utilise solar energy primarily to pump up ground water. By comparing the two years displayed using the slide feature, you can see the enormous expansion of agriculture into the desert areas both north and south of the Helmand River.

To further this point, a section of NDVI from 2004 and 2019 is shown in the following map to demonstrate how little agriculture existed in this area less than two decades ago, yet now there is extensive vegetation well beyond the green zone. You can see there was only vegetation within proximity to the river in 2004 as this land was already sufficiently irrigated by natural sources.

There are many complex reasons for Afghanistan’s growing illicit economy and it would be disingenuous to suggest that the trade spats between China and the US are the sole cause. But there has been an undeniable 'butterfly effect' as the sudden availability of cheap solar energy has coincided with an equally sudden rise in opium cultivation over the last decade.

Although this outcome was potentially impossible to predict, one thing is certain - no one is incapable of innovation, nor seizing an opportunity when it is presented to them.