Tariffs on Chinese solar panels are a sensible effort to enforce trade laws
Last week, the U.S. Commerce Department imposed roughly 31% duties on dumped solar panels from China.
Predictably and immediately Beijing and its apologists cried foul.
But as Dr. Usha Haley explains in a new op-ed in the Financial Times, the Commerce Department decision is a sound response to the "overproduction" and dumping of product from China into the U.S. market. And professed worries about a trade war with China are "unnecessary" since Beijing knows that it urgently needs the U.S. market:
Historically, US-China trade disputes follow a different pattern. In fact, China – while complaining loudly – tends to comply with trade-case findings rather than to retaliate in response.
Why? Because Chinese trade-policy makers are rational political players. They make decisions based on political and economic interests, including jobs and growth. They rarely suffer self-inflicted wounds (or even self-inflicted paper cuts). A trade war with China would hurt the US, but would mortally wound China.
Haley says that China's attempt to dump its subsidized solar panels in the U.S. market is a logical extension of Beijing's manufacture-at-all-costs approach, with Chinese solar-panel manufacturing capacity being "32 times greater than domestic consumption." Haley says that, as a result, China exports 95 per cent of its production. The good news of the Commerce decision is that it may finally encourage "domestic consumption in China thereby reducing the growth in China’s carbon footprint."
The burgeoning solar panel industry is important to U.S. manufacturing, and deserves federal support in the face of China's mercatilism. Haley points to China’s growing market position, which has adversely affected U.S. producers:
American manufacturers suffered. Twelve American manufacturers have had significant lay-offs or have shuttered completely. These manufacturing jobs that the US is losing to China pay better and have three times greater ripple effects than installation jobs. Between 2010 and 2011, the US went from a $540m trade surplus with China in solar products to a $1.6bn deficit. Chinese solar panel exports rose nearly 1,000 per cent. Simultaneously, Chinese imports of US polysilicon dropped 20 per cent as China ramped up domestic production.
Understandably, U.S. solar manufacturers filed a trade case alleging that the Chinese manufacturers received World Trade Organization-illegal subsidies and have sold their cells and panels below cost.
The subsequent Commerce Department investigation and the imposition of duties proved a fair remedy against such mercantilism.
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