Wednesday, May 29, 2013

The EU solar panels fiasco

So the EU is looking to apply some pretty hefty taxes on solar panels imported from China, arguing a case of anti-competitive dumping. I'm struggling to see the logic here. If China wants to distort its markets with the result that we are able to purchase more of its goods at a lower price, then surely this is all to the good? It means cheaper solar panels for consumers and businesses. Some European solar players argue they are being hurt by the cut-price competition but all of this economic resource can be be put to use elsewhere to produce something else that we are good at making, and some of this good can then be exchanged for Chinese solar panels. Also, there is a large industry built around solar panel installation that benefits from the existing situation and will suffer as higher prices lead to reduced demand.


Ijaz said...

The thinking is that China is selling well below their cost of production to put European firms out of business, whereupon they will increase prices and cover losses of having to sell below cost for a period of time. This works best if there are high barriers to entry, i.e. European firms can’t easily restart production and/or where there is a credible threat that China will act in the same way again if they try, e.g. Chinese firms holding surplus capacity that they can use to ‘flood the market’ again if they try. Perhaps the EC should wait until they see this behaviour to confirm their suspicions although this is often politically unacceptable. Having said all that, anti-dumping action is often used as a justification to protect domestic industries from more efficient competition from abroad.

Riz said...

On balance, I think we are on the same page. Your first point is well made, but alas history (US anti-dumping cases versus the Chinese) suggest prices do not spike up in this predatory manner. And the longer the practice runs of discounted prices, the greater are the economic surpluses generated for the country being dumped upon, working to offset any "start-up" costs for the European solar industry if they decide it is economically viable to come back into the market.

In America the predatory pricing case a factor behind the likes of the Sherman Act (1890) and more recently the likes of the Antidumping Act and the Byrd Amendment. These are not well intentioned acts and the economic damage they have created have well outweighed the benefits which flowed to the isolated few (who just so happened to have deep pockets and can be found kow-towing with the politicians who make the laws).

Politics is the domain of the devil non-humans, of two-faced strategies, of people saying one thing, meaning another, and doing something else entirely. They all need to be beaten about the head with a GCSE economics text book!