How Effective Are Punitive Tariffs? An Evaluation of Attempts to Reduce Trade Dependency on China in Solar Panels

In this paper I conduct an evaluation of a series of trade policy events in the solar panel disputes that have been ongoing since the early 2010s. The main focus is on the US’s Safeguard tariffs that were instigated in early 2018. The paper argues that the aim was to counteract the predatory pricing policies that have been made possible due to China’s extensive state subsidies directed towards solar panel production. The ordinary trade policy analysis could be hindered by several factors: such as the ocean of related trade policy events that preceded and followed the US Safeguard tariffs, or the circumvention attempts among local and multinational producers in China towards other production outposts in ASEAN. Here a firm survival analysis may be more exact and accurate as a complement to a classical trade policy evaluation. Because the aim with punitive tariffs is ultimately to eradicate or correct the behaviour of producers that base their business models and strategies in unfair practices. However, as the analysis in this paper demonstrates, punitive tariffs may not be very effective in what is now finally also becoming recognised as a series of trade disputes that concern more the systemic (comparative systems or ‘bundles’ of institutions) level of the economy. Whereas the traditional aim of WTO compliant policies such as countervailing and safeguarding tariffs is the discretionary practice level of individual firms. Under such circumstances, the paper concludes, punitive tariffs and as we know them in the context of the rules-based WTO system, could even prove to be counterproductive