Economics Commentary: Eu to Impose Anti-Dumping Tariffs on Chinese Solar Panels.
Commentary: EU to impose anti-dumping tariffs on Chinese solar panels.
Free trade versus protectionism is a topic of great debate in internal economics. The former takes place when there are no barriers to trade established by the government or international organizations. On the other hand, protectionism is the use of barriers to imports in a determined country and it is usually applied to protect domestic employment and firms.
According to the article, China is being accused by the EU of dumping, defined as the selling by a country of large quantities of a commodity, at a price lower than its production cost, in another country. In the case the accusation was proved, the government is allowed, under international trade rules, to impose anti-dumping measures to reduce the damage to its domestic industry.
The EU is already imposing a protectionist measure, tariffs. These are defined as a tax that is charged on imported goods and are considered as the most common type of anti-dumping measure. Before applying tariffs, the country consumed 0-Q2 Solar Panels at the price of the world (Pw), but domestic firms were producing only 0-Q1 and the rest (Q1-Q2) were imports. When the tariff is imposed, S (World) shifts upward by the quantity of the tariff to S (World)+Tariff. This produces prices to go up to Pw+T and the total quantity demanded of Solar Panels falls to 0-Q4.
Because of the shift in the world’s supply curve, domestic producers now produce from 0-Q3 and their revenue increases from g to g+a+b+c+h. Foreign producers now supply Q3-Q4, but even when their products now have a higher price, they have to pay the amount of the tariff to the government and thus, their revenue falls from h+i+j+k to only i+j. As a result, the government receives tariff revenue of d+e.
However, there are some issues that come with the application of this measure. First, is the dead-weight loss of welfare produced by the loss of consumer surplus, because even when consumers
Free trade versus protectionism is a topic of great debate in internal economics. The former takes place when there are no barriers to trade established by the government or international organizations. On the other hand, protectionism is the use of barriers to imports in a determined country and it is usually applied to protect domestic employment and firms.
According to the article, China is being accused by the EU of dumping, defined as the selling by a country of large quantities of a commodity, at a price lower than its production cost, in another country. In the case the accusation was proved, the government is allowed, under international trade rules, to impose anti-dumping measures to reduce the damage to its domestic industry.
The EU is already imposing a protectionist measure, tariffs. These are defined as a tax that is charged on imported goods and are considered as the most common type of anti-dumping measure. Before applying tariffs, the country consumed 0-Q2 Solar Panels at the price of the world (Pw), but domestic firms were producing only 0-Q1 and the rest (Q1-Q2) were imports. When the tariff is imposed, S (World) shifts upward by the quantity of the tariff to S (World)+Tariff. This produces prices to go up to Pw+T and the total quantity demanded of Solar Panels falls to 0-Q4.
Because of the shift in the world’s supply curve, domestic producers now produce from 0-Q3 and their revenue increases from g to g+a+b+c+h. Foreign producers now supply Q3-Q4, but even when their products now have a higher price, they have to pay the amount of the tariff to the government and thus, their revenue falls from h+i+j+k to only i+j. As a result, the government receives tariff revenue of d+e.
However, there are some issues that come with the application of this measure. First, is the dead-weight loss of welfare produced by the loss of consumer surplus, because even when consumers