TARIFFS ARE clumsy weapons. See, for example, those the Commerce Department began fully enforcing against China’s solar-cell producers last week.
An American solar-cell manufacturer complained last year that its Chinese competitors were getting too much help from their government and that they used this advantage to dump cut-rate solar products in the United States. The Commerce Department agreed, deciding to add duties against imported Chinese cells. But it is far from obvious how much a solar cell produced in China ought to cost. Commerce’s strategy for determining that — comparing costs in China to those in Thailand, a different economy — does not inspire confidence that the experts can get close to answering the question. Chinese manufacturers can probably evade Commerce’s new tariffs by moving some operations to Taiwan.
These sorts of problems are among the reasons we have long advocated caution in slapping countervailing tariffs on other countries, barring a critical national interest. It is very hard to see the high national interest at stake in the solar case.
America’s solar industry is growing, but not because the country is manufacturing lots more solar cells. Rather, the big growth is in areas such as installing solar systems. Raising the price of solar cells through tariffs will hurt that and other solar businesses. Moreover, even with an international market that’s fair, it is unlikely America would claim a competitive edge in solar-panel manufacturing without expensive government intervention. Countries such as China have proved better at producing myriad copies of identical electronic goods.
But, tariff backers argue, this case is also about enforcing international trade rules, bringing the global market into its natural balance — a reasonable goal. Pursuing it via tariffs, however, carries serious risks of making international trade still less fair. Already, analysts anticipate that China will respond by raising tariffs on American polysilicone, a material used in solar manufacturing.
Not one of the potential benefits outweighs the risks. Encouraging respect for international trade rules is not a sufficient justification for aggressive new tariffs. Rather, it is a firm basis for negotiating a settlement with the Chinese government that keeps tempers down and retaliatory duties off American exports to Asia.