In 1845 Frédéric Bastiat, a French economist, wrote an open letter to his national parliament, pleading for help on behalf of makers of candles and other forms of lighting. The French market was being flooded with cheap light, he complained. Action was necessary: a law closing all windows, shutters and curtains. Only that would offer protection against the source of this “ruinous competition,” the sun.
Three similar pleas are facing the administration of President Donald Trump, but they are not parodies. On Sept. 22 the United States International Trade Commission paved the way for import restrictions on solar panels, ruling that imports had injured American cell manufacturers. On Sept. 26 the Department of Commerce penciled in tariffs of 220% on airliners made by Bombardier, a Canadian manufacturer.
This cluster of cases represents around $15 billion in annual imports, less than 0.6% of the total. They are substantial relative to other requests, however, and unusually timed.
“Usually these trade cases come in waves, driven by a recession or a strong dollar,” said Douglas Irwin, an economic historian at Dartmouth College.
Every protectionist is unhappy in his own way. Boeing, the American airplane-maker, claims that Bombardier used government subsidies to sell its new C-series airliners below cost. Fred Cromer of Bombardier Aerospace accuses Boeing of a “commercial attack” to reduce competition.
Boeing has not made planes of the same size as the C-Series since 2006, and all planemakers sell aircraft at a loss in the early years of new models. Senior advisers to Boeing concede that they were too late to spot the competitive threat from subsidies to Airbus, a European rival. They want to hit Bombardier before it grows up.
The case involving solar panels was brought by Suniva and Solarworld Americas. They blame financial troubles on imported solar cells, which surged by 500% between 2012 and 2016. Cheap Chinese supply has not been contained by narrower anti-dumping duties, they claim, because Chinese producers have set up operations in third countries.
Whirlpool, the American domestic-appliance company, is seeking broad protection for its washing machines, similarly complaining that its competitors have bypassed tariffs. Rising imports from Thailand and Vietnam more than offset the drop in imports from China between 2015 and 2016. Its opponents in the case accuse it of fudging the definition of “washing machine” to show a surge, and have suggested that the company has lost market share because of its fading brand recognition.
For trade watchers, one of the most worrying elements of these cases is the way that the solar-panel and washing-machine companies have gone about seeking remedies. Both have resorted to Section 201 of the Trade Act of 1974. That allows companies broad trade protection, but has not been invoked since 2001. It fell out of use because of the high legal threshold for proving injury, and the tendency of previous American governments to reject tariffs in the broader national interest. Companies may be responding to signals from the present administration that it will be sympathetic to claims.
“The worry is that this is a crack open of the door and it’s about to swing open,” Irwin said—a rare case where closed might be better than open.
© 2017 Economist Newspaper Ltd., London (September 30). All rights reserved. Reprinted with permission.
Image credits: Michael Buholzer/Agence France-Presse/Getty Images