As our country's economic downturn appears to worsen, and election year rhetoric is tossed about, many critical policy choices are being ignored. The fact that many items that poor and working people use regularly are subject to substantial tariffs, which add to their final cost, is rarely mentioned. And oddly, some of the most significant items where tariffs were imposed are not even produced in large quantities inside the United States. Upon reviewing the tariff schedule imposed by the United States International Trade Commission, it is very unlikely that most Americans would conclude that it is their interests that are being considered in this situation.
Under the General Agreements on Tariffs and Trade structure (GATT), which established the World Trade Organization, the United States agreed to establish policies for the enhancement of international commerce. While there are both vocal supporters and opponents of the concept of "global free trade," the complexities of international commerce is something that is only vaguely understood by most Americans. We frequently hear the term "global competition" tossed about in public speeches and debates, but few people fully understand what that means. Ongoing debates over free trade frequently take place in the absence of relevant and substantive explanations of what costs and benefits are actually in play.
Those who vilify global commerce rightfully point to the numerous abuses of labor and resources that occur around the world in support of it. Supporters of global commerce rightfully point to the idea that many developing nations cannot survive without the possibility of selling their products to countries with more robust economies, where the demand for such products brings maximum return on investment. It is the extent to which global trade may engender fraud, abuse, and corruption that appears to be the origin of ongoing disagreements. But, while those are important concepts to consider, they are not directly affected by the imposition of tariffs.
The imposition of tariffs is one strategy that has been devised for supposedly preventing countries from flooding the economies of trading partner countries with products and services provided at prices that businesses in the local economies, for a range of reasons, cannot match. Tariffs can be imposed on both imports and exports, but it is generally those imposed on products coming into a nation that trigger the most extreme social and political responses. Since few people appear to understand the consequences of such tariffs, it is difficult to estimate the perceptions that most people have of their effectiveness. And on the occasions when tariffs are publicly announced, they are usually promoted under the guise of "protecting domestic production," and by extension protecting American jobs.
In one recent case in point in the United States concerning the solar industry, the United States imposed tariffs on Chinese produced Photovoltaic Cells (PVs), which are silicon based panels that are mounted in sunlight to generate electric power. A tariff of 31% was imposed on most of the solar cells made in China, ostensibly to protect a body of startups in the United States that produce comparable products. Because of the low cost of Chinese labor, which is a contentious issue as well, the Chinese currently dominate world solar cell sales. Most United States based companies cannot match the low Chinese production costs, and have been reluctant to invest deeply in expanded production until either demand rises enough to cause the price of Chinese produced PVs to rise in response to normal Supply and Demand pressures, or innovations are made that automate the process to the extent that such products can be made here as cheaply.
One interesting point worth making is that, while American production of PVs has remained relatively flat in recent years, the decreased price of PVs has triggered a dramatic upswing in the number of solar power systems being installed in the Sun Belt states. This has created a boom for contracting companies installing solar power systems in homes and businesses, and the jobs created tend to be jobs with better compensation that those in other sectors of business. It has also sparked more interest in creating production innovations that would lower the production costs domestically. There is also the added benefit of lowering our overall carbon footprint, but that is difficult to translate into economic terms.
Increased costs for solar cells after the imposition of these tariffs are likely to slow the rate of growth of the solar industry domestically, from the record rates seen from 2010 to 2011. With domestic solar production rising, it is very difficult to understand how such tariffs can be considered anything but frivolous. They may perhaps be beneficial to other energy producers, such as the fossil fuel industry.
If there were any indication that emerging companies in the United States were prepared to pick up production and meet the demand for affordable PVs, then the tariffs might make more sense. Since no such situation appears to exist, it would seem that it may not be domestic solar production that is being protected. The fact that numerous good paying jobs are now at risk, and solar production is already being threatened with related subsidy reductions or eliminations, one has to ask if the interests of the American people are chief in our tariff policy? If not, who is benefiting from these tariffs?
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Allowing dumping should never be policy no matter how many "free traders" spin it.
The Fed using QE3 should buy PACE bonds:
www.pacenow.org
This would put an estimated 3 million construction workers back on the job. Since the Fed can borrow at 2% it could charge 4% and return a profit to the Treasury to reduce the public debt.
On this scale enough homeowners will opt to buy "Made in America" to keep our companies afloat because the panels are a small part of a home retrofit. The less well off won't. But by increasing demand on this scale, American manufacturers could have the time they need to re-tool.
this also creates a HUGE economic benefit to America's residents, home and business owners, ratepayers and taxpayers who are being bled dry by rapacious Big Solar which is killing our wilderness and locking regular people out of the solar economy, while lowering rates and increasing property values and local employment.
there is no downside to a german style system of payments for small solar installations in the built environment and dozens of great reasons why to implement it. increased US manufacturing is a natural outcome, too...
In 2011 we imported $411B worth of Chinese goods, and the Chinese VAT rate is 17%. Meaning this "tarriff" would generate almost $70B of income to the US Treasury.
Even if we were forced to therefore stop allowing States to charge sales tax on foreign made goods, and the federal Government then had to reimburse the states for lost tax revenues, that would be AT LEAST $35B of additional revenues JUST from China.
The US imports over $2T worth of goods every year, even if after reimbursemnt the government got only 10% of that, thats $200B in new revenue. And for those who think we would be subject to retaliation, it would not happen. A VAT is charged in every one of those countries, and US goods sold there are ALREADY subject to this tax. All we are doing is subjecting thier goods to the same taxation as if it was sold their. Except WE are taking the revenue.
That Solyndra, Evergreen Solar, SpectraWatt, and others closed because of dumping? The U.S. should apply tariffs and announce the tariffs would stay in-effect for 15-20 years to encourage manufactures to manufacture solar cells here and discourage dumping in the future.
And what's this line that these highly automated plants closed because of the cost of labor? Making solar cells is an energy intensive business not a high labor business. China dominated the solar cell manufacturing because of short term cheap dirty coal energy. They consumed over 49% of all the coal burnt on the planet. They consumed more than Europe and the Americas combined!
And there is an added cost for this! 2/3's of our mercury pollution here in the U.S. now comes from China!
http://discovermagazine.com/2011/apr/18-made-in-china-our-toxic-imported-air-pollution
There is no place in the world of pollution called away!
The tariffs on solar cells are not punitive enough in my opinion!
Do a little more research next time!
The planet has always had cheap labor but it took the invention of the steam engine and cheap reliable power before the industrial revolution started!
China has our jobs because of short term low cost coal! They can generate electricity for about $0.02/kwh! My industrial rate in California is about $0.14/kwh!
That's my biggest headache!
China has our jobs because of short term low cost coal!"
doesnt make sense, nor is it true methinks.
china is increasingly closing it dickensian mines & importing from OZ & indonesia mostly, at world prices - same as US is free to do.
Power rates may well differ, but the price of coal is not the reason.