Bureaucrats concoct fictitious fantasy prices to justify protectionism.

The Department of Commerce (DOC) recently imposed anti-dumping tariffs on Chinese producers of solar-energy equipment. Chinese competitors, the DOC decided, materially injured American solar companies by selling goods at a price lower than “fair value,” as determined by the government. This comes on the heels of a separate set of tariffs proposed in March to counteract Chinese subsidies. Given the current administration’s tendency to subsidize green-energy companies like Solyndra in almost every way possible, U.S. retaliation in this case is questionable — as is the process DOC uses to calculate whether tariffs should be imposed in the first place.

The methodology the DOC uses to determine anti-dumping tariffs is inherently flawed. There are two economic classifications a nation can receive: “non-market economy” or “market economy.” For non-market economies, the DOC assumes that government interventions play a larger role than supply and demand in determining prices. The U.S. considers China a non-market economy, which it is. But the DOC then uses this classification to justify unfair and arbitrary methods of measuring Chinese dumping margins, which largely establish the tariff rates.

Since supply and demand are not, under this theory, the prevailing economic forces in China, the DOC tries to estimate what the prices would be in China if it were a market economy. According to Dan Ikenson, a policy analyst with the Cato Institute, the DOC doesn’t actually discover the true price difference, but instead concocts “differences between an exporter’s price in the U.S. market and a fictitious hodgepodge of estimated components serving as a proxy for his home market prices.”

Read more: http://www.nationalreview.com/articles/301662/commerce-s-anti-dumping-absurdity-noah-glyn