Mark Perry Translates from Politicalese to Plain English

by Don Boudreaux on October 12, 2012

in Trade

I trust that my former GMU student Mark Perry will forgive my quoting him in full, and approvingly, here.  It’s taken from his blog Carpe Diem:

 

U.S. Commerce Department plans to raise taxes on Americans buying solar panels from China

 

Below is an edited version of a recent New York Times article, re-titled “U.S. Will Place Tariffs on Americans Buying Chinese Solar Panels.”  These revisions reflect the voice of millions of disorganized American consumers, which is a usually a mere whisper when trade policy is decided in Washington, compared to the very loud and well-organized screams of domestic producers using the political process to their advantage:

The Commerce Department issued its final ruling Wednesday in a long-simmering trade dispute with China, imposing tariffs taxes on American consumers and solar-installation companies ranging from about 24 to nearly 36 percent on most solar panels imported from the country China, in order to protect domestic producers from foreign competition.

The penalties on American consumers are somewhat lower than those announced by the department earlier this year, when the government determined that Chinese companies American consumers were benefiting from unfair government subsidies from Chinese citizens and were selling their benefiting from purchasing Chinese products in the United States below the cost of production, a practice known as dumping “giving American consumers a great deal.”

For one of the biggest panel makers, Suntech, the duties on Americans are slightly higher, moving to almost 36 percent from about 34 percent.

The trade case stemmed from a legal filing nearly a year ago by a coalition of domestic manufacturers, led by SolarWorld, a German company with considerable manufacturing in the United States. The coalition contended that Chinese American companies, which dominate global sales with a two-thirds market share, were competing unfairly in the American market. were having difficulty gaining more than a one-third market share, and sought government-sponsored protection against competition from more efficient Chinese rivals.

“This is another important step in returning the solar marketplace in the United States to fair competition, market share to domestic producers through special interest trade protection” said Timothy C. Brightbill, a lawyer representing the companies that brought the case.

Wholesale prices have declined by nearly three-quarters since 2008 as Chinese companies expanded capacity and production much faster than the growth in worldwide demand. When China began the rapid expansion of its solar industry several years ago, many in the global industry expected that further technological breakthroughs would result in additional cost reductions.

But Chinese companies have driven costs down mainly through greater economies of scale from building ever-larger factories to produce conventional solar panels. Those efficiency gains have resulted in lower solar panel prices, which have saved American solar panel consumers millions of dollars, while at the same time rewarding Chinese producers with two-thirds of the U.S. market for solar panels.

The trade case has divided the American solar industry, with some manufacturers and installers siding with SolarWorld and others siding with American consumers and strongly opposing the tariffs.  The opponents argue that the duties taxes would make it more expensive for American families and companies to install solar systems, and called the trade protection an example of unfair “crony capitalism.”

Steve Ostrenga, chief executive of the panel maker Helios Solar Works USA of Milwaukee, who supported the trade case, said that he was confident “that American manufacturers can compete with China on an equal footing” but still welcomed the protection against foreign competition that the tariffs will provide.

Although the Commerce Department’s decision is final, economists would argue that the tariffs cannot should not go into effect unless the International Trade Commission finds that the Chinese pricing practices have actually harmed the American solar industry more than they have benefited American consumers, a determination that would be difficult, if not impossible, to prove is not expected until November.  Nonetheless, it is expected that the politically powerful and well-organized domestic solar producers and their political enablers will prevail over the disorganized interests of American consumers in a politically driven outcome that H.L. Mencken once described as “two foxes and a chicken taking a vote on what to eat for lunch.”

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