> On October 18, the U.S. government was asked to impose tariffs on imports of Chinese solar cells and modules, based on the argument that China-based producers have been heavily subsidized and are selling solar products at unfairly low prices.
So the Chinese government wants to sell us renewable energy infrastructure below cost. Sounds great to me.
Exactly, perhaps a little bit of history, Bastiat's essay:
A PETITION From the Manufacturers of Candles, Tapers, Lanterns, sticks, Street Lamps, Snuffers, and Extinguishers, and from Producers of Tallow, Oil, Resin, Alcohol, and Generally of Everything Connected with Lighting.
Great read. There is a subtle but important difference here in that it's an artificial advantage (government subsidies), and potentially a short-term one, versus that permanent natural foreign production advantage proposed in the article. The oranges in that story would always be half the price. There's no fundamental reason that these will stay under cost, and indeed, it seems unlikely that they would.
In the long run, it may be cheaper or more beneficial to develop a domestic industry in this, with all of the benefits that that comes with, even if the upfront price is higher. It doesn't seem like a good idea to let foreign goods be subsidized to the level where it will kill your domestic industries and reduce your country's ability to operate independently, especially if that's one of the goals of the subsidies.
> So the Chinese government wants to sell us renewable energy infrastructure below cost. Sounds great to me.
Will they agree to keep selling at that price for as long as we want to buy, or will they only do it until they drive competition out of business, and then jack the prices up, counting on high barriers of entry from keeping new competition out?
They did this with rare earth metals. The price rose 10x this year, and America put the mine in San Bernadino back into production pretty quickly. Wasn't the end of the world.
They did this with EVERYTHING. The costs of manufacturing are roughly 1/3rd labor, 1/3rd raw materials, and 1/3rd power. China subsidizes power and raw materials (through various means). If it weren't for that, Chinese stuff would be about 70% the cost of US stuff (assuming 10% the wages, equal productivity, and the same material and labor costs).
Subsidizing stationary inputs (like roads, power, and pollution sinks) or stuff that's expensive to move (steel, coal, trained workers) is a way to force a country to industrialize. Subsidizing easily exported inputs (like rare earths) is less effective, as it just ends up in your competitors' final products.
The mine in San Bernadino isn't back in production. You're talking about Molycorp, and their Mountain Pass mine. It's scheduled for the end of next year (http://www.molycorp.com/AboutUs/ProjectPhoenix.aspx). And I believe that's with extensive federal loans or loan guarantees.
That's somewhat true. Prices rose tremendously across all rare earth metals, and they fallen back notably for some light metals.[1][2] That said, they remain high for heavy rare earth elements (HREEs), where China still dominates production.[3] (Mountain Pass is predominately a light rare earth element-producing mine).
Bottom line: The rare earth story only partially supports your point. That said, the lead time for a new mine is 5+ years, and solar manufacturing lead times may be much lower (and thus barriers to entry also lower).
In this day and age of "just in time", scaling up production should not be an issue. They can't give them away forever, and if they do, it's a great value for the consumer. Protectionism is toxic, and is not the answer.
No, if anything, this day and age of just in time, scaling up production is harder if you suddenly cannot use your suppliers. Manufacturing, especially on such a large scale is heavily reliant on gained experience and what basically accounts to institutional knowledge/memory. The reason why some of the remaining American manufacturing remains profitable is because their combination of automation, and institutional knowledge. One is easy to replicate/replace, the other is much harder.
Neighboring countries want to send the USA tons and tons of labor below (current) cost, as well. They've put a ton of barriers (both literal and figurative) in place to prevent this, too.
Doesn't this only happen for a short period then once there is no more competition prices will rise again? What do economists say about the practice of selling below market costs?
When China raises their prices, will US firms have the PV tech and technicians to meet demand? The ultimate IP coup would be if China patented their PV technology and production processes.
The Japanese government did this (selling below cost) with consumer electronics, steel and some other industries, with the end result being that no television sets are made in the US anymore.
So the Chinese government wants to sell us renewable energy infrastructure below cost. Sounds great to me.