Thursday, June 6, 2013

Import Duties on Solar Panels is bad public policy

While I understand that the E.U may have legitimate concerns with how China does business:  after all, much of China's economy is directed by the central government, but when it comes to solar panel production it is hard to have much sympathy for the European case.

In the last few years, Chinese production of solar panels has surged.  China is now the number one producer and user of solar panels in the world.  And they aren't just producing them for domestic use, they are exporting them and doing so at a price point that consumers seem to like.  According to the Europeans, they can't compete against the Chinese imports not because the Chinese can legitimately produce them cheaply, but because because the Chinese government directly supports this industry.

  But, let's not forget that Europe and other developed countries have had systems in place to protect their own industries against outside competition for decades.  They have had control of international institutions, along with the United States and others, such as the World Trade Organization, the World Bank and the International Monetary Fund which have enforced the "Washington Consensus".  They have had import tariffs, heavy subsidies and reams of regulation to ensure that developing nation's are stuck in resource production but can't break in to value added production.

Well, the Chinese don't want to play by these rules, and haven't for a long time.  Can you blame them for doing the exact same kinds of things that the west has been doing?

In response, the E.U has imposed import duties on solar panels.  China immediately (well, today)  responded by announcing a study (likely the first step in imposing a tariff) on unfair European imports of wine to China.  E.U (mostly French) imports to China are estimated to be valued at $1.3 billion U.S dollars a year.  So, any tariff on these products could seriously impact E.U producers.

So, trying to punish them for doing the same thing that the west has done is problematic and likely to bring out a response, but there is another issue here too.  Do we not want cheap and good solar panels available around the world?

Should we not be taxing out things that have a social or environmental cost and encouraging those things which provide a net benefit?  If so, then how can the E.U not encourage strong competition in solar panels?

It's awfully hard to be upset at the Chinese for providing affordable renewable energy sources around the world.

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