Sunday, July 29, 2012

New Preliminary Anti-dumping Duties on Wind Towers Provide the Same Old Lessons

On Friday, the Department of Commerce announced preliminary anti-dumping duties on wind towers from China and Vietnam ranging from 20.85% to 72.69% and 52.67% to 59.91%, respectively.  The announcement itself is pretty boring: as with DOC's May announcement re: prelim AD duties on Chinese solar panels, the "non-market economy" methodology in these cases pretty much ensures pretty high anti-dumping duties (hence, the myriad calls for reform).  Nevertheless, the New York Times' write-up of Friday's preliminary decision - again, like the solar panels case - provides a few good lessons about US trade remedies:

First, the NYT article reveals the glaring disconnect in protectionist rhetoric about trade in green goods.  After noting that the imported wind towers also are subject to preliminary anti-subsidy duties (announced in May), the article provides the wind industry's response:
How the tariffs will affect the market is unclear. Like solar, the wind industry has been under pressure to bring down the cost of producing power to better compete with conventional fuels, a task made more difficult by the low price of natural gas and the expiration of an important subsidy at the end of this year. Wind industry executives say that the looming end of the support, a production tax credit, has already led to a decrease in demand for equipment and layoffs.

“On one hand, you say this is good for American manufacturing to have tariffs if they’re truly dumping towers below their cost into the U.S.,” said Michael Garland, chief executive of Pattern Energy, a wind developer. “On the other hand, it’s not going to solve the bigger problem we have, which is a dysfunctional Congress that can’t get anything passed. Because there’s this cliff that everybody’s facing at the end of the year, you’re not going to have any manufacturing in the U.S. anyway."
Yes, you read that correctly: after praising duties on (allegedly) subsidized Chinese and Vietnamese wind towers, Mr. Garland immediately turns to... advocating more US subsidies.

You cannot make this stuff up.

Second, the NYT article demonstrates once again that, in today's globalized economy, bilateral protectionism typically won't resuscitate an ailing or uncompetitive industry because other low-cost imports will fill the void (aka "trade diversion"):
On the solar side, there are also questions about the impact of the duties. The major Chinese solar manufacturers have been able to keep prices low and skirt the tariffs by purchasing cells, the component of the panels to which the tariffs apply, elsewhere.

Imports of Chinese panels and cells decreased in May to $124 million from $226 million the year before, according to the Coalition for American Solar Manufacturing, an industry group that supports the trade cases. But shipments from other countries like Malaysia, Taiwan and the Philippines were up sharply. In the case of Malaysia, shipments were up by 950 percent over the previous May, to $135.5 million, exceeding China, according to the coalition.
Finally, the article shows that duties aren't the only economic harm that trade remedy cases - or the threat of such cases - can inflict on consumers:
Although the overall solar market continues to grow, executives and analysts warned that uncertainty about the outcome of the trade cases, which are only at the preliminary stage, could damp enthusiasm for future projects because costs are unclear.

“I’m paying X rate today. Am I going to have to pay a duty on that six months, a year down the road?” asked John Smirnow, a vice president of the Solar Energy Industries Association, a trade group that is advocating for negotiations between China and the United States to occur simultaneously to the legal cases.
Given that US solar producers have received a boatload of their own state and federal subsidies and are suffering from overcapacity, uncertainty surrounding potential duties on dumped or subsidized solar imports definitely isn't limited to American consumers - something that no one who supports US subsidies seems to acknowledge.

Maybe they will if a few foreign AD/CVD investigations start.

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