Absolute fucking dingbat lunacy

The US Commerce Department has opened an investigation into whether China and Taiwan are dumping a certain class of solar cells into the US market at below fair market value.

Launching the latest round in an ongoing dispute with China over solar energy products, the department took aim at some $2.6bn in imports of certain crystalline silicon photovoltaic products from the two countries.

The imports include crystalline silicon photovoltaic cells, modules and panels, by themselves or integrated into other products.

The probe will also extend to whether China is also unfairly subsidising the same class of products, or a countervailing duty investigation.

Lessee.

Someone, somewhere, has to subsidise solar cells and solar power. Because it is still, in most cases and most places, more expensive than coal or natural gas fired electricity.

Thus all those feed in tariffs, grants for installation and so on.

OK. And here we’ve an allegation that the Chinese Government has been making solar cells for Americans cheaper. Hey, maybe it’s even true?

But what sort of barmcake moron do you need to be to complain about this? Seriously….

The American consumer can provide the subsidy through the taxes which pay for grants or through higher prices for ‘leccie via the tariffs. Or the Chinese taxpayer can subsidise the American consumer by gouging said Chinee to offer subsidies to Chinese producers.

The allegation is that China is indeed doing that second: and the Americans are so fucking stupid that they’re complaining about it?

It’s as if the short bus goes directly from the special school into the bureaucracy.

33 comments on “Absolute fucking dingbat lunacy

  1. Sure, dumping means cheaper shit for consumers today.

    But it can also mean less choice for consumers (hence higher prices) tomorrow.

  2. Tim

    Based upon the prinicple that we produce to consume, I agree entirely that it is better (for America) to have Chinese taxpayers/gov’t coffers fleeced to subsidise US consumption of solar energy than US taxpayers. i also agree that subsidies to an uncommercial extant technology hiners rather than encourages innovation.

    However, there is surely another angle to this (please understand that I am not suggesting for one second that US legislators have worked this out for themselves; it is pure happenstance): The value of having an industry, any industry, sited in your country would seem to be incomes earned by the staff in your country, the likelihood, if they are educated, that they will go on and continue to earn those incomes, the resultant spending power of them as consumers and – yes, let’s say it – the tax revenues from those staff, which can then be spent on your population and not the Chinese. Add in the possible patents that incument businesses are probably better able to develop and (possibly) the greater chance that supply chains will grow in the geographical vicinity of the main provider and it is possible that the Chinese see this as a good investment.

  3. No, no, no, NO !

    You no rissen !

    It’s called Green Jobs, the whole point of subsidising solar and wind and stuff is to provide business opportunities and thus create job in the renewables field. Eagerly taken up in the US and Germany by such entrepreneurial giants as Solyndra, First Solar and multi-nationals like Siemens & Bosch.

    And it has worked ! Accountants are having to take on extra people to wind these companies up.

  4. Ironman,

    Where’s that subsidy going to come from? It comes from taxpayers pockets one way or another. You take £1bn out of people’s pockets, that’s £1bn that doesn’t get spent on the things people want. So, while you’re creating green jobs, you’re going to destroy other jobs.

  5. The assumption that China and Taiwan are in cahoots would be of massive importance to global politics, not just US import rules, if it were in any way true. Clearly it isn’t.

    The fact is that, essentially as an outgrowth of Moore’s Law, the cost of solar energy collectors has been dropping fast and will continue to do so. It is even possible it will become economic without subsidy, though it still suffers from being intermittent. This is not an argument for renewable subsidy (which is likely to leave us with old and uneconomic solar collectors when the rest of the world had modern ones). It is an argument for letting the market be free.

  6. bloke in germany – has that ever worked in any major industry in practice?

    Say the Chinese want to dominate solar cell manufacturing by offering them at crazy-cheap prices today. What happens if they decide to jack up prices tomorrow?

    The solar cells they sold cheap are still cheap. We got the benefits of that. Whether they can get away with charging higher prices depends on how quick/easy it is for other countries to start manufacturing competing products. And solar isn’t ever likely to be our main source of leccie. If panels become so dear it makes sense to use something else, people will use something else.

    Are there real world examples where a government has helped an indigenous industry to corner the global market for something by selling cheap, then successfully obtained above normal profits for a sustained period after killing off the non-subsidised competition?

  7. Tim Almond

    Please don’t misunderstand me, I have zero interest in creating green jobs, or in ‘creating’ any jobs, or for that matter in the jobs themselves. I’m offering the suggestion that the Chinese are viewing it all as an investment to corner a market.

    As for the subsidy, yes it comes from taxpayers and yes that means it doens’t get spent elsewhere this year. The point, from a narrow tax point of view, it might actually generate more revenues in the medium to long term.

    And please note again, I’m not impressed with the economics when consdering the open world economy; I am simply viewing the Chinese gov’t as a commercial competitor.

    And I will be very disappointed if there isn’t a long line of people waiting to give me a kicking for this!

  8. Steve, the nearest thing I can think of is the airline industry where the first part happened (subsidising, favourable treatment, coddling, protection of domestic industries) but the collection of excess profits thereafter didn’t happen. The latter was partly because the international treaties protecting airlines got torn up to greater or lesser extents, EU/transatlantic free skies, opening of ex-Soviet airspace to regular commercial traffic and so on, but also because other countries (principally the gulf states) got in on the subsidising of their airlines act at just the time the west was pulling out of it.

  9. The result of which is we have a race to the bottom in the western airline world because the incumbents face three cost problems directly due to the subsidy/protection model:

    (1) their own bloat after decades of mollycoddling
    (2) Losing their highly-profitable, long-haul premium/flexi eco passengers to the likes of Emirates, who can provide superior service for less cash due to subsidies and operate out of countries that can reserve their geographical advantage to the subsidised home carriers.
    (3) Losing the cattle class passengers who were never individually profitable, but made the whole thing financially viable by filling up the back of the plane that you could never pack with business class seats. These passengers all went to new entrants who are doing nicely because of their ruthless cost approach and the fact that such passengers are incredibly price sensitive – to most of these passengers one euro price difference decides who gets the business.

  10. Ironman – makes sense if you think there’s a relatively limited variety of products manufacturers can make.

    Is there though?

    If the Chinese want to subsidise the world market for widgets, the rational response is surely to thank them for their generosity and make gizmos instead?

    Taking a famous American example: Corning Glass. If they’d stuck to making window panes and beer bottles, they’d probably have been driven out of business donkey’s years ago by cheap foreign imports.

    Instead they switched to more sophisticated, higher value products like their gorilla glass screens that are now found on most good smartphones.

    Or take ARM as an example. Acorn couldn’t compete in the long term against foreign produced home computers, but ARM is going like gangbusters because they do something they’re very good at, that can’t easily be replicated.

  11. Right, let’s have global free trade now, but that means both “global” and “free”. That “free” meaning governments not bucking the market in either direction. Meaning companies can adapt (like Corning) to genuine market conditions rather than having to fight Chinese mercantilism – however misguided Chinese mercantilism might be.

    Etihad and Emirates are going around buying into Euro regional carrier networks (FlyBe, Darwin). Which is fine. So let’s likewise insist Air France, BA and Lufthansa can run hubs in Dubai and Qatar, with auctioned slots rather than sweet deals for favoured customers. Not gonna happen because some government somewhere sees an advantage in protectionism. Whether they are right or wrong seems to have little to do with the fact that this is market-bucking and hence, to us ideological liberals, almost certainly results in the net destruction of wealth.

  12. Back to basics: production is to provide consumers with lifestyle enhancing goods and services and a return to shareholders on their investment.

    It is not: to create or protect jobs; to provide tax revenue; to achieve political objectives.

    Money taken from one part of the system, via taxes, to be given in wages which will be used to benefit the economy, assumes it would not be used to benefit the economy equally or more if left where it was.

    I find this common notion about ‘job creation’ and Government ‘investment’ via taxation and subsidy akin to being able to top up a half-filled bath by taking a ladle and moving water from one end to the other, telling of how some minds work… or rather don’t.

  13. John B

    That’s not giving me a kicking; that is just not reading me properly!

    I am a free trader, the world gets richer, happier and smaller through open trade with no subsidies or tarriff or non-tariff barriers. The question here is: if the Chinese won’t play fair, should we respond in kind or are we better off letting them do it?

    All of these somment have been good. At the moment though, as I see it, Steve wins.

  14. bloke in Germany,

    Surely you mean airplanes, not airlines? It is commonly alleged that we’ve ended up with the Boing/Airbus duopoly because the US/EU governments provide hidden support to their respective companies.

    However, this effect only works for large, complex, and expensive systems like airplanes. It would take years, perhaps decades, to set up a competing aircraft manufacturer; but it would be comparatively quick to set up a new solar panel factory. The biggest obstacle would be licensing any patents held by the Chinese / Taiwanese manufacturers.

  15. No, I mean airlines. The airlin_er_ protectionism is even more sophisticated. I also don’t agree the barriers to entry are so high (though I admit we will probably never see serious competition to the 350+ seat duopoly). But Embraer and Sukhoi are making successively larger aircraft and the Chinese will no doubt reverse-engineer and clone an Airbus or thousand in the near future like their HS rail did.

    What the “isn’t it great China is subsidising our shit” position ignores is that China is basically a girt big copy shop with zero IP protection. They can copy anything from handbags to high-speed trains, not so hot on actually designing new stuff or incremental improvements to older stuff.

    So you can pay for the innovation and then find a clone on the market at a fraction of the price you can afford to sell at. Of course cheap and free shit is great for consumers in the short run, but if we want continued innovation we do need that recognition of IP. Globally.

  16. @BIG I agree re copyright – I’ve never quite understood the argument against IP protection, outside the textbook.

  17. bloke in germany/JamesV/Cassius Clay

    Agreed. I understand pharma patents being limited to 20 years has had just that effect on development.

  18. bloke in germany said “dumping … can also mean less choice for consumers (hence higher prices) tomorrow.”

    Isn’t that only true if there are significant barriers to entry? If the Chinese do get market dominance and use that to try to put up prices, surely other firms start up in competition.

  19. In the States, just about every “Green Energy” initiative pushed by the federal government has simply been an exercise in political patronage. The actions taken against China are not for providing illegal subsidies, but for threatening said patronage. In this case it’s simply a matter of the Obama Administration protecting an avenue for dumping taxpayer (actually money borrowed from China) money on its supporters.

  20. To clarify… can’t have China providing solar cells when you can have the federal government subsidizing Democratic party donors to start, enrich themselves, and then bankrupt a company making solar cells.

  21. When the Chinese have cornered the market…
    (as if market corners are ever durable)
    We just do to them what they do to us: steal their IP.
    The IP is quite well understood, it’s the manufacturing efficiencies which are harder to reproduce (and rarer to be patented).
    As it happens I’m a bit (a small bit) optimistic about solar cells, because we can design them to optimise the spectrum of the sun. Chlorophyll is pretty inefficient in this respect.

  22. BIG, surely you forgot to mention the taxes put up by the western governments on airline fares, where the tax is now higher than the fare itself in some cases?

    I would wager that this has more effect on airline profitability and passenger numbers than anything else.

  23. @ Steve 12.20 pm
    Yes, there is a real-world example – motorbikes. Japan didn’t kill off niche producers (Harley-Davidson and BMW) but it did kill off Norton and BSA.
    And the super-normal profits from ‘bikes funded Honda’s move into cars, such that Honda is now one of the largest manufacturers of cars *in the UK*.
    I also wonder about French nuclear power but there are *very few* examples.

  24. Ironman’s argument can be extended. In times of high unemployment, the cost to a country of manufacturing solar cells is cost of imported materials plus the *net difference* between wages paid net of tax, NI, health insurance costs etc and unemployment benefit that would be paid if they were out of work. Spain has a solar cell manufacturing plant a 50+% youth unemployment. If I was Spanish trade minister I should be searching for an excuse to block imports of Chinese solar cells.

  25. BiG, so China is copying products and not innovating so we lose out? Isn’t that what Japan did as it learnt how to make things. Now we get fantastic products. I expect China to be learning and to be a fantastic innovator soon.

  26. john77 – “Yes, there is a real-world example – motorbikes. Japan didn’t kill off niche producers (Harley-Davidson and BMW) but it did kill off Norton and BSA.”

    BSA and Norton did badly against the Honda of yesterday. But Honda does alright against the Honda of Today. That is, when Honda competed on price using cheap sweated labour, Norton went under. It looks reasonable to assume a cause and effect here. But the Koreans and now the Chinese have moved into motorcycle production. And the Chinese have done so in a big way – I wouldn’t be surprised if most bikes in the world are now built in China. So the Japanese are the high paying producers facing the cheap sweated labour competition.

    But they are doing alright. Would you rather buy a Japanese bike or a Chinese one? Exactly.

    I don’t think Honda drove Norton out of business. I think their Unions did. With some help from the management.

  27. Precisely because solar cell technology is improving so fast (Moore’s law rates – see mine above) cornering the market in current production isn’t going to help you next year – indeed there may even be a negative barrier to entry in that you aren’t stuck with last year’s manufacturing gear, as western countries seem to be today.

  28. Ironman’s unusually interesting argument @2 above is exactly the same argument I made below @Timmy elsewhere 22nd Jan “The machines are going to take all our jobs” when he called me “a weapon’s grade moron” for deploying it (as you do with weapons)

  29. @SMfS
    To be fair to Honda, they trounced Norton/BSA on giving the punter what they wanted as much as price. A fire it & go bike. Why I bought one back in the early 70s. Rode it but never touched the mechanics. Essentially what the Lambrettas & Vespas gave. Brit bikes were still for oily handed Brit bikers. But oily handed Brit bikers were buying cars to commute

  30. @ bis
    Honda’s export sales were contingent on its performance against Norton in races which were enabled by its R&D department being funded by fat profits from its protected home market.
    I can only remember commuting by car once in my life (unless you want to count conferences in Scotland)

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