How China Is Grabbing "Our" Electric Market

By David Henderson.

"Scratch a progressive, and you sometimes reveal a protectionist.

Progressive journalist Robert Kuttner writes:

China has begun selling cheap electric cars in the U.S. These are deeply subsidized, when you count all the government subsidies to China’s auto industry, the oppressed labor, and China’s protectionism.

These cars include the Polestar, made by China’s Geely Auto Group, and the K27 made by China’s Kandi—with a sticker price of $17,499. That’s less than half the cost of the cheapest U.S.-made electric vehicle.

His August 18 piece is titled “How China is Grabbing Our Electric-Car Market.” He makes clear that he thinks this is bad. He goes on to write:

The EV tax credit is industrial policy and energy policy. The Biden administration hopes to convert the U.S. to all-electric cars, and to restructure the U.S. auto industry accordingly. But at this rate, the prime beneficiary will be China.

He then concludes:

We can’t duck this issue: Industrial policy is China policy. We need to bite this bullet and limit the credit to cars made in the USA—and address all the other ways that China’s mercantilism challenges the future of U.S. industry and technology, as well as our national security.

What’s wrong with his thinking? A lot.

Take the first quote, the one about China’s subsidies. If it’s true that the Chinese government is forcing people to work to produce these cars, then yes, it is implicitly making workers subsidize production and, therefore, consumers, whether here, in China, or wherever the cars are sold. And that is wrong.

I wonder if it’s true. I don’t know. I bet Kuttner doesn’t either. It’s also wrong for the Chinese government to tax its own people to subsidize auto production, just as it’s wrong for the U.S. government to tax us to subsidize EV production.

But let’s be clear who the victims are. It’s not U.S. consumers; we gain. It’s Chinese taxpayers. Should we decline to receive this foreign aid? I don’t think so.

And it’s hard to see how China’s protectionism amounts to a subsidy to Chinese-produced cars. If the protectionism is on inputs into car production, then China’s protectionism is a tax on Chinese-produced cars.

Now look at the next quote. The prime beneficiary is not China; it’s buyers of Chinese cars worldwide. As Kuttner himself points out in the first quote, these cars are priced way below U.S. EVs and so we in the United States, and probably elsewhere, gain.

Kuttner’s last quote is a real stretch, and deeply ironic as well. If he’s right about the subsidies, then he’s right that China’s policy is mercantilist. It does challenge certain domestic industries but more than makes up for it by subsidizing U.S. consumers. It’s hard to see why changing the mix of EVs to include more Chinese cars threatens our national security.

And the irony? To deal with the Chinese government’s mercantilism, Kuttner advocates subsidizing only U.S.-built EVs. In other words, mercantilism."