IB International Economics
U.S. duties on China solar would hurt jobs: report
Economic competition has always been a quest for whoever can gain the most profit and economists often preach about allocative and productive efficiency. However, what if it is at a high cost? Currently, “a U.S. solar industry group is fighting a rival coalition’s request for steep import duties (tariffs, a tax on imported goods) on solar cells and modules made in China”, because the Chinese solar industry is allegedly using “government subsidies [(government financial aid to a producer)] and unfair pricing practices”, allowing dumping (selling goods below what is socially acceptable). The group has asked the “U.S. Commerce Department to impose duties of more 100% on Chinese competitors” to offset this, but this would threaten “16, 917 to 49,589” domestic jobs because Beijing would “retaliate by slapping its own duties”. Thus, CASE’s desire to practice protectionism (shielding a country’s domestic industries by imposing taxes, subsidies, or quotas) may cause more harm than good.
Since the goal is to protect domestic solar industry producers, a tariff of 50%, which “would shut out most imports from China”, would allow a larger domestic producer surplus (Figure 1; from G to CG)-producer gains. However, it would drive up prices from Pc to Pt, creating deadweight loss (loss of economic efficiency) D, as a result of over production as quantity supplies shifts from Qfs to Qts, and F as a result of under consumption as quantity demanded shifts from Qfd to Qtd. This would decrease domestic consumer surplus (consumer gains) from ABCDEF to only AB. Not only does this decrease productive and allocative efficiencies, it inevitably leads to job losses in the U.S. solar industry due to the higher prices. However, “SolarWorld, along with six other U.S. solar energy companies” desire a tariff of over 100%. This would not only significantly increase producer surplus (Figure 2….), it would...