More Trade Actions – Wind Turbine Towers, Washing Machines

Dave Johnson

The game is to underprice your product until your competitors go out of business (like Solyndra & other solar companies). Then you own the market. This is about a lot more than just jobs. Our government is finally doing something about leveling the playing field!

This week, in separate actions, our Commerce Department imposed “anti-dumping” tariffs on wind turbine towers and washing machines. The wind turbine towers were coming in from China and Vietnam, the washing machines from Mexico and South Korea.

Why Sell Under Cost?

Dumping is when a product is sold for less than it costs to evenmake the product. The idea is that your competitors will go out of business and the manufacturing ecosystem of suppliers, knowledge and infrastructure moves to you, so you’ll come out ahead in the long run.

It takes enormous investment to open up a manufacturing operation because you need the proper facilities, the right local utilities, the tools and machines, the skilled workforce, the suppliers, the local infrastructure, the channels to markets, and all the rest of the ecosystem that supports manufacturing. When that is lost to another country it is very, very difficult to get it back. Especially in a country with a Congress that refuses to understand the need for a national industrial policy.

This is the game that countries like China have been playing with their national industrial policies designed to capture strategic industries like solar and wind energy. By selling lower than cost for several years you gain market share and shed competitors. The suppliers, knowledge base, and jobs move their way. Eventually they build or strengthen an entire ecosystem and it is just too costly for others to try to compete.

At first it is attractive to take advantage of the lower prices, later the jobs, factories, companies and entire industries are gone along with the jobs and economic power they bring. Or, in other words, look around at what has happened to us.

Washing Machines

U.S. Sets Duties On Mexican, Korean Washing-Machine Imports

The U.S. set tariffs as high as 82 percent on large, residential washers from South Korea and 72 percent on the products from Mexico, concluding the items are sold below production costs to drive out American competitors.
The Commerce Department in a preliminary finding today responded to Whirlpool Corp. (WHR)’s complaint that LG Electronics Inc. (066570) and Daewoo Electronics Corp., both based in Seoul, and Samsung Electronics Co. (005930) of Suwon, South Korea, use unfair trade practices. Laundry appliances accounted for 30 percent of Whirlpool’s 2011 revenue of $18.7 billion, according to its annual report.

… Whirlpool has 3,500 employees in Clyde, Ohio, between Toledo and Cleveland, where washing machines are manufactured. The company has invested $175 million to make energy- and water- efficient appliances, according to a statement when the complaint was filed on Dec. 30.

… The duties may help reduce unbalanced trade with both nations. U.S. has deficits of $13 billion with Korea and $64 billion with Mexico, according to the U.S. Census Bureau.

Wind Turbine Towers

NY Times: U.S. Raises Tariffs on Chinese Wind-Turbine Makers

Chinese manufacturers have been illegally selling steel towers for wind turbines below the cost of production and will have to pay duties of 20.85 to 72.69 percent on imports, the United States Commerce Department said Friday in a preliminary ruling in an antidumping case brought by four American tower manufacturers.

The department said it found similar dumping on the part of Vietnamese manufacturers and set duties at 52.67 percent for CS Wind, a major supplier to the American market, and 59.91 percent for all other Vietnamese companies.

The finding is the fourth this year in favor of American wind and solar manufacturers and is likely to intensify tension with the Chinese, who have been rapidly expanding manufacturing capacity for alternative energy technologies and flooding global markets with inexpensive products, especially solar panels.

… “Commerce has taken an important step to address the significant dumping that is taking place,” said Alan H. Price, a lawyer at Wiley Rein, which is representing the American wind manufacturers that brought the complaint. The duties “will help to remedy the material injury already suffered by the U.S. industry and force the Chinese and Vietnamese producers to compete fairly,” he said.

Politico: Commerce OKs tariffs for wind towers,

Utility-scale wind towers from China will face anti-dumping duties from 20.85 percent to 72.69 percent, the Commerce Department said Friday.

Towers from Vietnam face anti-dumping duties between 52.67 percent and 59.91 percent.

The anti-dumping tariff, designed to counteract nations selling goods in the U.S. at below-market rates to snatch up more market share, adds to countervailing duties of between 13.74 percent and 26 percent, the department announced in May.

That means some wind towers from China could face tariffs as high as nearly 100 percent.

Problem: No US Industrial Strategy

A problem with tariffs on alternative-energy goods is that it raises prices. Meanwhile the oil companies are able to keep our government from acting to encourage alternatives with a badly-needed carbon tax and a national renewable energy standard. And existing tax incentives are expiring. This holds the price of oil and coal down relative to the alternatives, at a time when we desperately need to act on climate change

The NY Times story, U.S. Raises Tariffs on Chinese Wind-Turbine Makers, explains,

“On one hand, you say this is good for American manufacturing to have tariffs if they’re truly dumping towers below their cost into the U.S.,” said Michael Garland, chief executive of Pattern Energy, a wind developer. “On the other hand, it’s not going to solve the bigger problem we have, which is a dysfunctional Congress that can’t get anything passed. Because there’s this cliff that everybody’s facing at the end of the year, you’re not going to have any manufacturing in the U.S. anyway.”

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