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Home Publications Blogs Beat the Press The Point of Tariffs on Solar Panels Made in China Was to Raise the Price

The Point of Tariffs on Solar Panels Made in China Was to Raise the Price

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Tuesday, 13 August 2013 04:23

The Post had a somewhat confused editorial about the imposition of tariffs on solar panels made in China. The argument for the tariffs is that China subsidizes its panels leading to unfair competition. As the editorial correctly notes, the determination of whether the panels are subsidized is not easy. (Panels sell for less than average cost, but well above marginal cost.)

However the editorial notes a counter-tariff imposed on a key material input imposed by China and then tells readers:

"Tariffs on both sides, meanwhile, promise to push up the price of solar equipment in the United States."

Of course raising the price of solar equipment in the United States was the goal of the U.S. tariff, not an unexpected outcome as the Post seems to imply. The real questions on the tariff is what the long-run picture for the industry will look like if China continues its current policy unchecked. (Do we think they will get a near-monopoly and then jack up prices?) And second, are protective measures worth the cost of slowing the spread of solar energy, even if it might lead to a somewhat stronger domestic industry? These basic issues do not appear in the Post's editorial.

Comments (3)Add Comment
When Governments Compete, Ideologues Win
written by Last Mover, August 13, 2013 5:59

It's all very simple. China baited the Obama haters by eliminating Solyndra with lower subsidized prices knowing the GOP would gloat with glee that Solyndra went down from American government subsidies rather than lower prices from China.

Once the scam was outed, America retaliated with a tariff designed to offset exactly the subsidy from China and create a competitive neutral level playing field for solar panels, carefully designed to mimic the highly efficient health care industry in America.

This prompted China to counter-retaliate with a tariff on a material input to panels from a Michigan firm which threatened to lay off many employees, which in turn prompted some fool on the WaPo comment board to seriously argue that the minimum wage be reduced to $4/hr on an inflation adjusted basis since its inception based on well known principles from Econ 101.

Not to be left out of the war against against alternative energy, sugar producers in Florida decided to push for higher tariffs on imported sugar so they could continue subsidizing themselves indirectly through negative externalities and destroy even more of the Everglades to prevent it from soaking up too much carbon dioxide.
Dean edges closer to libertarianism
written by pete, August 13, 2013 9:28
Joing the new Obama/Rand Paul coalition. No more NSA, no more drones, no more messing with housing...wow.... Monkeying with trying to determine who is screwing who with tariffs is insane. Let it go. No import fees. There was a too long attempt to save Detroit. A quick death, like shooting a horse, would have been much better in 1970. Now, 40 years later there is still cleanup to be done. The answer to tariffs then was the Vega and the Gremlin....yuck...Now there is the Volt...what a disaster. If another country wants to subsidize our consumption of cars or solar panels, or whatever, let em. The Japanese (apparently) bought us cars. China is buying us clothing and solar panels...Will the result be the same? Bring it on! Lower the tariffs, pay for relocation/training with the consumption savings....its a win win.
...
written by skeptonomist, August 13, 2013 9:37
There are more than two layers to this. When the Chinese place a tariff on polysilicon, this may at first cause job loss in the US, but it also raises the price of Chinese solar panels even more. And if the US solar panel industry picks up, that would restore the market for polysilicon.

Polysilicon production and price have been extremely volatile. Apparently the Chinese have plenty of production capacity of their own, which they are now shutting down.

http://www.reuters.com/article/2013/07/31/us-china-solar-polysilicon-idUSBRE96U1CD20130731

But they prefer better-quality foreign material, which comes from other countries besides the US.

Chinese manipulation of the rare-earth supply gives ground for use of tariffs to prevent monopoly. But for various reasons besides tariffs prices of solar panels may vary considerably in the near future.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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