Sunday, May 20, 2012

Let's talk trade

Trade policy is arguably THE biggest Producer Class issue of all.  Producers argue that it is terribly important that a society makes as many of their tools for survival as is possible.  In this scenario, you ONLY import what is absolutely necessary.  For a good Producer, "Free" Trade is just a scam to take economic power from the Producers and give it to the merchants.  It is an argument the Producers once won easily but have lost completely in the past 35 years.

The "Free" Trade arguments are quite compelling.  Take, for example one of my favorite industries—motor vehicles.  Under Producer Theory, something this absolutely vital to the economy of the nation should be surrounded by multiple layers of legal protections.  When the Asians started to elbow their way into the international automobile market, the Europeans made certain Asian market penetration would be very low while in USA, the "Free" Traders ensured virtually unfettered Asian automobile penetration.  It could be argued that the Japanese invasion was the best thing that ever happened to the domestic car makers because they had grown exceedingly sloppy with their production techniques and NEEDED a wake-up call.  The cars of the 1970s were TERRIBLE!

But let us assume that the automobile industry is the best-case scenario for the advantages of "Free" Trade.  Yes, you can buy something from GM these days that is statistically as well-built as anything from Toyota, but the economic carnage of this philosophy has been incalculable—lost jobs, devastated communities throughout the rustbelt, etc.

And then there are the very real but equally hard to measure costs such as "what is lost when we stop making things and only shop?" or "how much human potential was destroyed when the 'vampire capitalists' like those from Bain Capital swept in and stole everything they could fence and left the rest to rot?" or especially "what kind of economic 'thinking' glorifies such naked vandalism?"

I come from almost pure Viking stock—my ancestors knew a thing or two about pillage.  It took us 500 years to evolve into something a bit more civilized and yet all this progress was destroyed in one generation by the ravings of economists who claimed that pillage was just fine so long as it was done in brokerages and law offices.

So now the pendulum has swung back (a BIT) and the arguments are being made that industrial potential is an economic good worth protecting.  The fight is being waged over solar panels which is an excellent industry to use to form a more enlightened and Producer-friendly trade policy.  I understand the argument for cheap solar panels.  But the arguments for a protected domestic industry are also compelling—especially with solar which is going to require ongoing maintenance.  Having working panel factories nearby with customer support expertise is going to be an economic good worth having.

This story will be revisited periodically—mostly to see if the rulemakers in Washington understand the real issues involved here.

Green-blind? US wages war on Chinese solar panel makers

Published: 18 May, 2012, 18:11

The US is set to increase tariffs on solar panels made in China in a bid to restrict Chinese companies’ presence on the market. Beijing claims this may hurt efforts to promote clean energy.

If the US ruling is implemented, Chinese solar-panel imports will face tariffs of up to 31 per cent.
Beijing has retaliated rejecting a US antidumping ruling, with Chinese makers warning higher tariffs could impact promotion of clean energy.

Chinese Commerce Ministry spokesman Shen Danyang says the US ruling is unfair and warned it could harm clean energy cooperation.

"This is not consistent with China's development status, does not conform to the facts of China as a market economy and highlights the tendency of trade protectionism in the United States," Shen said.

Three major Chinese manufacturers – Yingli Green Energy Holdings, Suntech Power Holdings and Trina Solar – reject accusations they were selling goods at improperly low prices.

The thorny situation is adding pressure to US-Chinese trade tensions. The countries are two of the world's biggest markets for solar, wind and other renewable energy technology. Both governments are promoting their own suppliers in the hope of generating higher-paid technology jobs.

American companies are facing fierce competition from China, as demand weakens in Europe and other key markets.

Several US solar panel makers, led by US SolarWorld, had asked the government to penalize China for dumping low-price products on US markets. Solar-panel maker Solyndra went bankrupt after the California-based company received a $528 million US government loan, citing Chinese competition as one reason behind its failure.

However a majority of US solar panel installers oppose tariffs on Chinese panels, arguing that less expensive imports have helped make the product more affordable for US customers. They have also warned China might retaliate against US suppliers.

"This is the first step to a trade war between the US and China," said Jigar Shah, leader of a coalition of solar companies that oppose US tariffs. more

Commerce Department Slaps Large Tariff on Chinese Solar Panels

By: David Dayen Friday May 18, 2012 6:23 am

Neoliberals and conservatives will get to trot out their favorite phrase, “trade war.” And to be sure, there’s a jobs vs. environment question to be asked about this latest move by the Obama Administration. But the Commerce Department has moved ahead with slapping high tariffs on Chinese solar panels:
The United States on Thursday announced the imposition of antidumping tariffs of more than 31 percent on solar panels from China.

The antidumping decision is among the biggest in American history, covering one of the largest and fastest-growing categories of imports from China, the world’s largest exporter.

The department said the United States bought $3.1 billion worth of Chinese solar cells last year, giving China more than half the American market for the devices.

Many solar panel installers in the United States have opposed tariffs on Chinese panels, contending that inexpensive imports have helped spur many homeowners and businesses to put solar panels on their rooftops. The new tariffs are likely to mean a substantial increase in the price of solar panels here.
Basically you have a debate between US solar manufacturers and US solar installers. The installers say that their industry is finally getting competitive with fossil fuels, in part thanks to cheap solar panels from China. And they say that this will retard their growth. The manufacturers, of course, don’t want to be taken out of the solar market, undercut by Chinese imports. This is basically what happened to Solyndra.

From an environmental standpoint, if you want to see renewable energy grow, you may not care about the country of origin of your solar panels. China subsidizes their solar industry, and that means more solar panels available to the world. They do the same thing with wind turbines, which is the subject of a subsequent case in front of the Commerce Department. Do we want to increase the costs of these industries, making coal and natural gas more attractive?

Here’s Sherrod Brown’s argument. He supports the solar tariffs. This is from his press release:
Brown wrote to President Obama in December expressing his support for a petition filed by a coalition of U.S. solar manufacturers with the U.S. Department of Commerce and International Trade Commission seeking relief from illegal Chinese trade practices. The petitioners alleged that Chinese imports of crystalline silicon solar cells are being dumped into the U.S. market far below their fair value, and that Chinese solar cell and panel producers receive massive subsidies from the Chinese government. In October 2011, Brown introduced an amendment to increase trade enforcement to enable U.S. trade officials to increase trade enforcement initiatives to level the playing field for Ohio solar industry and other manufacturers forced to compete with unfair Chinese trade practices.

“The Commerce Department’s decision today shows that trade enforcement matters, and is an important step towards combating China’s multiple, massive, and illegal trade violations. It’s been proven that China isn’t competing in the clean-energy marketplace—it’s cheating, and its unfair solar trade practices have already resulted in the announced the loss of thousands of good-paying U.S. manufacturing jobs,” Brown said. “I applaud the Commerce Department for working to hold China accountable for its unfair solar subsidies and dumping practices. If we want to have a solar manufacturing industry, we need to utilize trade enforcement tools to combat the massive export subsidies other countries provide. This decision will help establish a fair and level playing field for American manufacturers, including the many solar manufacturers in Northwest Ohio.”
Brown also has pending legislation with Chuck Schumer that would help protect the domestic solar industry.

I would agree with Brown on a few points. It’s not like China only violates this one trade law, on solar panels. This is about the multiple trade violations in which they are engaged. And if you let the solar panels slide, you’re essentially picking winners and losers among industries based on what social or environmental policy you want to see. There are either trade laws or there aren’t.

I would like to see the spread between Chinese and US-made solar panels in the wake of this announcement. If demand for solar remains high – and it’s growing all the time – I’m not sure whether people will mind paying a bit extra in the near-term. The long-term advantages of solar work out the same financially: to the individual, there’s a savings from going off the grid or selling back power to the grid. The cost of the parts up front isn’t that much of a factor in the long run. And the way that power companies are charging for solar these days, with no up-front cost and factoring the price into your electricity bill over 25 years, I’m not sure anyone really sees this cost increase in the end. Plus, you allow stateside manufacturing companies to compete. more
And of course, this is the nut of the issue.  Until we can get a handle on our oil imports, we will just continue our economic decline.

One Crucial Product Accounts For 58% Of The US Trade Deficit

Jana Kasperkevic

The reason America's trade deficit has remain elevated is petroleum, which accounted for 58 percent of the trade deficit in 2011. The trade deficit rose to more than half a trillion dollars during the period.

A report by the Diplomatic Council on Energy Security states, "For the past two decades, the United States has run annual trade deficits for both petroleum and nonpetroleum goods and services, thereby requiring it to sell physical and/or financial assets to foreign nations in exchange."

The difference between the value of foreign investments held in the U.S. and the value of U.S. investments held abroad has been negative since 1986. Currently, it totals roughly negative $2.5 trillion. more

When you look at this chart, remember that USA oil production peaked in 1970.

One thing is certain, trade is not about be constrained by shipping costs.

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