By Stan Abrams
This was the big China story — not exactly a sexy one, but that’s life. And yes, even though the U.S. Commerce Department went ahead with duties that range from 2.9 to 4.73%, the market was pretty happy with the result. It turns out that most folks were expecting higher numbers.
By the way, if you’ve been reading the news on this, you might be slightly confused with some of the terminology. Since the Commerce Department’s investigation involved subsidies given to these exporters by the Chinese government, the duties imposed are referred to as countervailing duties. If this was an antidumping case, we would call these antidumping duties. You commonly see references to both of these as “tariffs.” How’s that for a non sequitur?
Back to the main event, the Commerce Department’s investigation here involves an obvious political story, in addition to a legal one, both of which I’ve been talking about recently. The political calculation here for the president is a familiar one with respect to China. On one side, he’s got his base (or what should be his base), which includes unions concerned about the employment effects of Chinese solar panel imports. Along with the unions, there are the domestic solar firms that are getting killed by the competition (and going bankrupt).
According to the New York Times, Chinese solar imports now represent half of the U.S. market.
Additional motivation to act comes from a certain Willard Mitt Romney, who has been spewing the tough China talk for months now, accusing the president of being too soft on the PRC. Yet another China action further inoculates the president from such charges, which everyone expects to see more of in the general election (assuming Romney can sew up the nomination).
On the other hand, a huge price hike on solar panel imports might not be such a great thing either. And with so many other China related trade disputes up in the air, perhaps the president didn’t feel the need to go for the jugular on this one.
However, there is another issue flowing around here (at least I think there is), and it involves a trade issue I talked about a couple of weeks ago. If you recall, a U.S. Federal court recently ruled that the government could not impose both antidumping and countervailing duties in certain cases. Congress has since remedied that situation with the passage of new legislation.
I’m not sure, but perhaps we’re looking at an applicable situation here. While the Commerce Dept has imposed countervailing duties, many believe that this is just step one and that antidumping duties may be the second act in this little drama (which would happen in May). If that is indeed the case, then all of those folks out there expressing their satisfaction with the government’s “reasonable” and “measured” ruling might be a bit premature with their happy talk.
My opinion on this dispute is a little complicated. On the one hand, I really despise the entire antidumping framework, which has never made any sense to me except for special circumstances. On the other, there are certain kinds of subsidies that distort trade, and countervailing duties that respond to this distortion make sense.
On the other other hand (assuming I had three), I’m not a big fan of any kind of unilateral trade barriers instituted under domestic law, which are often the tools of protectionists/rent seekers. I’d much rather see that sort of thing dealt with at the multilateral level.
I’m not sure where that leaves me on this case. If I had to break it down, I guess I’d say that this initial determination involving subsidies seems perfectly acceptable, particularly given the relatively low rates. However, if we next see the imposition of punishing antidumping duties, then I reserve the right to be cranky.
About The Author - Stan Abrams is a Beijing-based IP/IT lawyer and law professor with an M.A. from Johns Hopkins in International Relations, a J.D. from Boston College Law School, a B.A. from Pomona College, and writes at China Hearsay. (EconMatters author archive here)
The views and opinions expressed herein are the author's own, and do not necessarily reflect those of EconMatters.
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