The farce of clean energy dumping

The exact phrase “clean energy dumping,” which attacks China’s exports of cheap clean energy products (such as solar panels and EVs), was not found in Treasury Secretary Janet Yellen’s quote.But when I give her speech solar cell manufacturer Snivashe said.flood the market” has the same meaning.And in that way financial times Journalists interpreted her speech: “See.”Janet Yellen warns China of clean energy dumping,” March 27, 2024.

After trying to convince us that fossil fuel use threatens humanity’s future, these politicians got carried away. Because some producers in the world want to sell us products at low prices that can prevent catastrophe. In the United States, once known as the “land of free enterprise,” the federal and state governments heavily subsidize domestic producers of “green products.” The so-called Inflation Control Act provides large tax credits. Isn’t it a travesty for the US government to beg foreign socialist governments to reduce exports of green products?

Indeed, Chinese producers are almost completely controlled by the state, and the latter can more easily force taxpayers to subsidize domestic exporters. (Exporters use their own resources to produce goods for foreigners, but let’s skip this contradiction of protectionism.) Why do American consumers and producers accept gifts from foreign taxpayers? Will they refuse and prefer other citizens to pay instead? Certainly, American producers (shareholders and workers of companies that lose competition) will suffer and be forced to adjust. Some workers will have to change industries, some shareholders’ investments will lose value, and some companies may go bankrupt. Suniva has already done so once in 2017.

The U.S. government (both the Biden and Trump administrations) believes that the relatively flexible U.S. economy is threatened by socialist corporations and Chinese taxpayers, whose average income is a quarter of the average U.S. income. It seems so. Furthermore, as the following graph shows, imports from China (including the Chinese-made portion of input components) account for only 1.9% of personal consumption expenditures. 2011 study by the Federal Reserve Bank of San Francisco. (This low figure is partially explained by the fact that services, which are mostly non-tradable goods, account for two-thirds of US consumer spending. Imports from China only in certain industries accounts for a high proportion of consumption expenditure.)

“China’s excess capacity is distorting global prices and production patterns, hurting American businesses and workers,” said Yellen, who was an economist before becoming a groupie politician. Of course, subsidies and tax breaks distort prices and production, but short of annexing China, there is little the US government can do to change the Chinese state’s policies. We may be able to do a little bit through the World Trade Organization, but the Trump and Biden administrations are working together to nullify that.

And how much distortion is caused by annual federal spending ($6.1 trillion in fiscal year 2023), which includes multiple subsidies, primarily for individuals but also for businesses? Same question about federal revenue ($4.4 trillion), most of which is taxes. The same goes for the deficit ($1.7 trillion). How much do federal benefits to individuals distort labor and charitable markets? What additional distortions are caused by minimum wages and coercive privileges given to unions? Questions like these are not easy to answer, but rather than accusing the governments of developing countries of giving Americans what they claim they need to survive at bargain prices, the Treasury secretary should at least ask them. You should pretend to.

What damage could the forced leniency of Chinese taxpayers cause to the American economy? Let’s make the most heroic assumption for my case. Assume that the total production value of green goods and services in the U.S. economy is $1 trillion, or 4% of GDP. (This is a wild assumption, but it’s double. 2007 Department of Commerce estimated maximum. This study used shipment values, which include a broad definition of green products and services as well as a lot of double counting, rather than value added like GDP. less than 20%). Although it is unrealistic, let us suppose that all producers of environmentally friendly goods and services in the United States go bankrupt due to competition from producers in communist China. Add the assumption that after this “victory” “China” suddenly decided to cut all green exports to the United States. This is also a fanciful assumption except in the case of war. Even this highly exaggerated scenario would not result in a catastrophe.

We must not forget the savings realized by China’s green imports up to the hypothetical cut-off point, and the production, consumption and investments that would not otherwise have occurred in other areas. More importantly, who would doubt that U.S. companies could not quickly pivot to importing the same products from other countries, even at higher prices? Who would doubt that greedy Americans or foreign investors (whose companies are likely included in pension funds) would not rebuild America’s green industry if it were economical? While 4% of GDP is not an insignificant amount, total investment in fixed business equipment and structures amounts to approximately $2 trillion per year, or 8% of GDP (DEA data for 2022). Moreover, building the U.S. green products industry need not be completed in just one year, and some imports from other countries will continue to be economical in any case, especially on the manufacturing side. Under more realistic assumptions, substituting China’s green imports would probably be an easy feat in a relatively flexible economy, without too much government intervention.

Of course, it would be better for the Chinese state to stop interfering in the businesses of exporters, which would help the world, from Chinese taxpayers to American investors sinking money into companies that cannot compete with big green companies from China. That would be a good thing for many people. The US government should engage in this business of persuasion, rather than becoming completely Trumpian. And we should preach by example and show what a free economy is.

Any economist familiar with public choice economics knows that politicians and bureaucrats generally demonstrate by their actions that they are just as self-interested as ordinary individuals. Economists are therefore not surprised when they observe politicians spouting absurdities. But anyone who believes in a free society should be shocked by the most extreme cases. homo politics. These politicians have no shame.

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For the featured image in this post, I had a hard time getting DALL-E to draw what I wanted. My idea for DALL-E was that Chinese solar panels and EVs would fall like manna from the sky. Officials from the Ministry of Commerce shot the goods and tried to prevent people from collecting them. In order to get DALL-E to semi-cooperate, I had to explain as follows. Jill The gun of a Department of Commerce employee shoots roses. (The man lying on the ground looks like a mana chaser who was hit directly through the heart of the rose.)