Much Ado About Nothing

Current mechanisms of the American economy are preventing the American consumer from purchasing solar-products with the competitiveness and price-effectiveness he desires. His desires may be easily met, but the American government opts to interfere with the economy’s natural dynamics of demand and supply by deterring consumers from acquiring the, actually, most competitive factors of production.

On October 10, 2012, the Department of Commerce (DOC – department of communism?) announced an imposition of tariffs of up to 36% on imported Chinese solar technology. The DOC’s ruling solely concerns Chinese-made crystalline silicon photovoltaic cells, whether or not incorporated in processed modules. The Department aims to counteract the pernicious dumping and countervailing schemes implemented by some of the major Chinese producers of solar technology. Chinese dumping within the American solar market has involved the selling of photovoltaic technology in the United States at less than the fair market price – thus hurting the competitiveness and attractiveness of the US products. The Chinese government has facilitated such endeavors with countervailable subsidies, specifically rendering the production of the exported goods more economical. So, the DOC’s reactionary measures primarily consist of an acute raising of tariffs on Chinese imported products. And the first headline we read in the press is that the American solar industry applauses the decision. You have got to be joking.

The DOC’s decision is unnecessarily menacing to the American solar industry. This is because, as I have come to believe, the only possibility to increase investment in the US solar industry is considerable reduction of production costs – and the DOC is effecting precisely the opposite. Reduced production costs, naturally, would enable domestic producers of cells and panels to go down in prices, increasing demand for their products while maintaining stable profit margins. American solar systems would be, hence, rendered far more attractive investments for domestic consumers and more profitable assets for domestic venture capitalists.

Nonetheless, in spite of being aware of this dynamic, Commerce opts to implement protectionist policy that effects the opposite of what is beneficial to the American solar industry – tariffs that will increase costs on imported solar cells and, hence, increase prices on the solar systems domestically produced with these imports. This is especially devastating considering the benefits the American solar industry has recently derived from Chinese imports, and the gradual emergence of greater profitability they have entailed.

In previous years, US solar producers have enjoyed cost reductions of up to 75 percent due to imports of economical Chinese photovoltaic components. The industry has gradually replaced its more expensive, domestically produced factors of production with those Chinese imports, rendered highly cost-effective by economic circumstances ranging from small labor costs to a greater abundance of exploitable raw material. American retailers have experienced similarly soothing conditions. But one must acknowledge that in spite of these already-emerging reductions in costs of production, the American solar industry must make still greater advancements in cost-effectiveness to disassociate itself from its repute of unreliability and risk.

However, Commerce impedes the continuation of this process by increasing production costs for vast portions of the industry – those relying on cheap, imported photovoltaic products. The therefrom resulting increases in prices of domestic products may deter dozens of potential capital-investors in photovoltaic systems, maintaining the industry’s stagnancy rather than nurturing its revitalization.

Within one week, the Chinese solar manufacturers reacted and established companies in Taiwan and relocated their billing administration to circumvent the tariffs.

Much ado about nothing.


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