The tariff question

Imposing duties not always right, but it is justified for solar panels

The reason for an economy unhampered by national borders is to link demand with the most cost-effective location of construction. Natural resources, geography and workforce conditions and expectations all come into play for the country of origin.

For the country that wants to provide the same goods and services, without the resources and low-cost ingredients, a solution is tariffs. Adding an import fee – a tariff – puts the country wanting to protect its industry on a more even footing with its own consumers.

But that has to be done with a legitimate basis, otherwise the other country responds with a levy of its own on another product. And, the first country responds with its tariff. World economic history has proved that cycle does no one any good.

The core component of solar power, the electrical-generating panel, has largely been built in quantity by the Chinese. Chinese panels have almost consistently sold at a price significantly lower than the cost of panels built in this country or in Europe. The U.S. has claimed unfair competition by the Chinese companies, and the Commerce Department is moving toward placing 26 percent to 42 percent tariffs on some Chinese companies. A few months ago, tariffs of 19 to 35 percent were added to panels made by companies believed to have benefitted from unreasonable Chinese government subsidies.

A story in The Wall Street Journal last week reported the tariff percentages and put the coming tariffs in context, including reporting the possibility that one Chinese company could begin building solar panels in this country. U.S. companies may likely expand their production, too, given the tariffs.

The story makes it clear that it is not just the U.S. that believes that Chinese manufacturers are dumping their product at below cost, or that the Chinese government is unfairly underwriting the cost of Chinese companies’ panels in order to grow the market. European manufacturers feel the same.

A third of the panels installed in the U.S. in 2013 came from China, the Journal reported, and total installations measured in megawatts are expected to increase about 30 percent in 2014.

The Chinese companies deny they’re selling at below cost or are receiving significant government benefits.

There is no doubt that American manufacturers, and thus American regulators have, in recent years, become much more familiar with how industries in China are structured and their costs of doing business. The American automobile industry has its partnerships with Chinese companies, so do luxury-goods retailers. So, too, clothing manufacturers and retailers, high-tech and communications devices’ manufacturers, and a variety of U.S. fast-food franchises. To varying degrees, these business are contributing to what is known about the costs of doing business in China and what the Chinese government’s role is, and might be. That is a price of the partnership that, in most cases, the Chinese, and some other countries, require.

It is not difficult to predict that Chinese panel manufacturers could arrive in this country to establish their own factories employing Americans and paying American taxes. The Japanese auto industry and brands from other countries were very successful at that.

As the quality of solar-electric panel performance increases, as it has, expect the demand for panels to increase. American manufacturers should have a fair opportunity to win those orders. American engineering can compete. Negating the lower costs that dumping and government subsidies give Chinese manufacturers is the right step to take.