Alberto Mingardi  

Feeling Good About Solar Panels

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War is the health of the state, said Randolph Bourne. What then about trade war?

The European Union is imposing tariffs on solar panels imported from China, as Chinese manufacturers are accused of dumping and EU producers are "suffering badly", as the commissioner for trade Karel De Gucht observed.

Newspapers report that levies of 11.8% came into force yesterday. Without a deal in two months, tariffs will go up to an average of 47.6% in August.

Making fun of protectionism, and making an important point in jest, Frédéric Bastiat wrote an unforgettable Petition of Candlemakers asking government to take action against "the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price". The sun.

European rulemakers would make a nice subject for Bastiat if he were around today.

First of all, they continue to consider their duty to defend "a business sector", and equate that to a defense of the productive economy at large. Change is painful, in business as in life. However, is it really a safe assumption that the current arrangement of the factors of production in Europe is "perfect," and thus we should shield it from change? If anything, the fact that the Chinese produce cheaper solar panels may point us in the opposite direction.

Second, they insist that the European technology in solar panels is better and more advanced than the one available to Chinese manufacturers. It well may be. But the fact that a technology is "better" does not necessarily mean that consumers want to pay for this "better" technology. Consumers may be willing to have a "so-so" technology, if they do not consider the best one deserving a premium price. I suspect EU officials overwhelmingly own an iPhone, and think everybody deserves the better, technologically speaking. But you don't make iPhones available to everybody by avoiding competition by cheaper, and technologically less egregious, competitors.

Fourth, and here Bastiat would have fun indeed, one should ask herself who paved the way for a demand for cheap Chinese solar panels. The answer is: government itself. We have been told the environment was at stake, to the point that individuals choosing "green" technologies for their energy supply needs were held to be role-models of sorts. People like feeling good, but feeling good at a cheaper price feels even better. Now what does the EU tell them? You should feel good by paying more. Perhaps the good old Jacques Bonhommes and Mario Rossis may start thinking that the government did not care for the environment more than it cared for candle- pardon: solar panels-makers.


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COMMENTS (6 to date)
S writes:

I had never heard that Bastiat joke before. Given that candles and such were invented to provide light when the sun is not present I imagine only the previously converted found it to be cleaver.

Best

S writes:

On second thought, if the sun were not around there would be more demand. I get it. I retract!

Hazel Meade writes:


If you really want to kill the solar power industry good, ban all the cheap solar panels.

Shane L writes:

Am I wrong in thinking that the argument is that the Chinese government has been subsidising Chinese solar panels to undermine the European producers? So this EU response is a response against Chinese protectionism, not a response against free market competition. No?

TMC writes:

"the Chinese government has been subsidising Chinese solar panels" How about we give them carbon credits for all the CO2 they are saving.

This seems to be, ala Hanson, another time climate 'science' is not about the climate.

Chris H writes:
Am I wrong in thinking that the argument is that the Chinese government has been subsidising Chinese solar panels to undermine the European producers? So this EU response is a response against Chinese protectionism, not a response against free market competition. No?

As TMC notes, carbon-based energy production is an externality and the Europeans are supposed to take that idea seriously. Depending on the degree of the subsidy, making solar panels cheaper relative to carbon-producing energy should be closer to Pareto-Optimality than a straight market price. Indeed the relative pricing of carbon-producing energy to cleaner energy is supposed to be the big glaring example of a market failure. The Chinese take an action that effectively works in a way to counter-act it, and NOW the Europeans scream about interference with market prices?

Forgive my cynicism, but I think I've just become slightly more Hansonian after reading about this.

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