This was a project I completed for my graduate journalism program, and it was inspired by Dan Ariely’s book “Predictably Irrational”.  For my own experiment, I asked people in New York City whether they would prefer to give or receive a gift card, or the same amount in cash.  In light of the upcoming holidays, I hope you enjoy….

I used to love gift cards.  When I was a kid I liked getting them. As an adult, since I am bad at choosing gifts, I like giving them.   Dan Ariely, author of Predictably Irrational, seems to like them too.  In a blog post titled “An Irrational Guide to Gift Giving”, Ariely suggests,

“you can think about gift certificates for iTunes, drinks, movies, etc. as gifts that not only get people to experience something new, but also get them to experience something guilt-free, and without the pain of paying.”[1]

Ariely, I concede, makes a good point.  His overall thesis in this post is that “A good gift is something that someone really wants but feels guilty buying it for themselves.”  Ariely here is considering a gift card a kind of “nudge” in a particular direction, to borrow a term from behavioral economist Richard Thaler and Cass Sunstein.  Limiting a person’s choices helps to clear his mind, and guide him toward beneficial decisions. But is there some a bit creepy about furtively choosing for someone else?

Some might argue that these sorts of tricks are manipulative and paternalistic.[2]  They make the giver look good or feel good, rather than give the recipient what she really wants. One can almost hear some libertarian economists braying their dissent.[3]  Should a gift please the giver or the receiver?

Ariely states in Predictably Irrational that human beings have “market” norms and “social” norms.  There are certain ways we behave in different situations that reflect different values and different rules.  In the aforementioned book, Ariely asks whether people would buy a boss or a coworker a $100 gift, or simply give the person the same amount in cash.  Most, he says would choose the gift, although it is not inherently more valuable.  The idea is that giving cash in this case would be inappropriate, even though it might be more useful.

I wanted to explore this question by comparing a cash gift with gift card or gift certificate.  My thesis was that most people would prefer to give gift cards, but would prefer to receive cash.

I asked 33 people in New York City whether they would rather give a gift card to a friend for a special occasion, or give the same amount in cash.  Twenty-five out of 33 would prefer to give the gift card.  I then asked if it would make a difference if a) the store issuing the card also charged a nominal (no more than 5 dollars) fee for the card, or b) if the card carried an expiration date or inactivity charge.  Most people said no in both cases, with one person in each case saying “I don’t know” or refusing to answer the question.

However, the most interesting fact for me was the fact that almost the same number of people—24 out of 33—said they would rather RECEIVE cash instead of a card.

This latter choice is a perfectly rational economic decision, and it was what I expected.  Cash is more liquid—it can be spent anywhere.  Also, cash does not really expire, and some gift cards do.  For example, the Stanford Shopping Center, a premier mall in Palo Alto, California, has outsourced its “all-mall” gift cards to a company called Simon.  Simon cards charge a monthly inactivity fee of 15% if they are not used within a year.

However the choice to receive cash begs me to wonder why we then would give something to someone else that we would not prefer to receive ourselves?  This seems to be an almost-statistically-exact case of irrationality.  Almost everyone asked would prefer to give something they would rather not receive, and receive something they would rather not give.

I should add that most people I interviewed did not value gift cards as highly as an actual gift, but when asked why they would gift a gift card when they would clearly prefer to receive cash, most said that the gift card gives the impression that you have “put some thought into it”.  I did not take notes on every person’s comment, but this was a common answer.  Most also seemed quite surprised to realize they would actually prefer to receive cash.

Here are my numbers:

I did not expect the majorities to so closely mirror each other—I expected more people would appreciate the gesture of someone actually selecting a gift card for them.  I was not surprised that many people still chose to give a gift card when the store assessed a fee or included an expiration date, even though to do so is completely irrational. When you consider that gift card is really just another form of currency, it seems silly that you would give someone $105 and only expect $100 in return, or that you would agree to a time limit on a contract.

Only one person actually volunteered a point that might support Ariely’s quote above—that gift cards give people a chance to buy things they would otherwise feel too guilty buying for themselves. The person in question told me that gift cards are good to give young recently-married couples who are concerned about finances.  She claimed that many men in these relationships often immediately start funneling any cash gifts into bills or a down payment on a house.  Giving a gift card allows the couple to—really, forces the couple—to spend the money on other, less practical things that might bring more fulfillment or contribute better to happy memories of the wedding.

One mistake I regret is that I did not record all of the reasons my subjects gave for their answers—especially those that preferred to receive gift cards.  In most cases I chose to stick to my survey questions to stay efficient and to reduce distractions and variables.  But, I suspect that if I has asked one of the nine who preferred to receive gift cards, one might have answered something akin to the point Ariely made in his blog post—that by restricting our choices, gift cards allow us to splurge on things we might otherwise not buy.

I was also reminded (yet again), that I am no better than anyone else.  My choices would be no different from either majority.  I would give the gift card rather than the cash in many cases—especially to recipients whom I do not know well enough to confidently choose a smart gift.  But I would almost always prefer cash.  I have a small stack of unused gift cards with tiny balances on them in desk drawers.  Some have expired; some were misplaced; some I just keep forgetting to put in my wallet.  I have a $100 gift card to a restaurant in San Francisco that went out of business before I could redeem it.  I am much better at keeping track of dollar bills.

It is important to bear in mind that ‘irrationality’ should not carry the stigma it often does.  This experiment, like many people such as Ariely, Kahneman, and Tversky do, simply shows that we are complex beings with myriad concerns.  The best practical lesson I could draw from this experiment, and from much of Ariely’s work is the importance of being mindful, alert, and aware as we live our lives and make decisions.  Within reason, we can do whatever we want, but we should at least know what we are doing.

One-time-Presidential-candidate Mitt Romney famously to Tesla Motors—a Silicon Valley company that builds fast sports cars with electric engines—one of Barack Obama’s “losers”.  In the first presidential debate, Romney said, “

But don’t forget, you put $90 billion, like 50 years’ worth of breaks, into solar and wind, to Solyndra and Fisker and Tesla and Ener1. I mean, I had a friend who said you don’t just pick the winners and losers, you pick the losers, all right? So this is not the kind of policy you want to have if you want to get America energy secure.”

Ouch.  To be fair, Obama’s record funding green energy companies has not been stellar, though, unfortunately for Romney, Obama now has four more years to make up for mistakes.  But Solyndra has been a disaster and has prompted investigations from both the Energy Department and the Treasury.

Ener1, a lithium ion battery company, also the receipient of Department of Energy funds under Obama, had to file for bankruptcy in 2012 (though it has since reemerged).  Of course, also, the Anaheim-based  plug-in hybrid car company Fisker has a fate that is by-no-means secure, but the company has delivered at least 500 models to customers already.

Tesla Motors, based in San Carlos, CA, might be the brightest of the bunch, and may not at all be the “loser” Romney considered it.  Motor Trend just voted the Tesla Model S the 2012 Car of the Year  and investor analyst opinion on the company with a 3.5B market cap is slightly favorable.

At a sticker price of $59,900.00 Tesla’s offerings are a bit too rich for the modest consumer, especially in this economy.  But with carbon dioxide levels at record highs in 2011, demand for electric vehicles may grow faster than we think.  That could be a huge win for the company that has the highest-performing electric engines on the market.

Yes, you can run your car on fryer oil. Maybe even that Bradley tank, or the Millennium Falcon.  But like many, do you want to, and can you afford it?

Ethanol remains a popular fuel option for those who have the ingenuity to piece together their own engines (people have been doing so for decades). But the biofuel explosion that grasped the world in the in the first few years of the new millennium has lost favor. The oilfields of Saudi Arabia might have been eclipsed by the cornfields of Nebraska. Brazil was second to the United Stated in global corn for biofuel production, according to a recent piece featured in Scientific American.

The price of liquid ethanol is falling: it is 26% lower than is was at this time in 2008, the article says.  Brazil has about 400 ethanol plants, but 41 of them have closed.  Lula, Brazil’s president, thought that cleaner-burning ethanol could be a boon for both global climate-change concerns and Brazil’s economy.

However, writes Claudio Angelo,

“Five years on, Lula’s vision has tarnished. Biofuels are falling from grace around the world as critics charge that devoting millions of hectares of agricultural land to fuel crops is driving up food prices and that the climate benefits of biofuels are modest at best.”

80/20% Ethanol/petrol blends are more popular and affordable than pure ethanol and most consumption comes from this blend.

Angelo traces the root of the present problem to the economic crisis of 2008, when money to new investments for the industry dried up just as the ethanol sector was expanding.  Many ethanol companies were already in debt, and fell back on harvesting old fields instead of investing in new ones.  A country that was supposed to be leading the ethanol revolution found itself in the position of importing 1.5 Billion liters of corn ethanol form the US, writes Angelo.

The Brazilian government, meanwhile, was offering tax subsidies on the sale of new cars and–to control inflation–freeze the price of petrol and diesel.

This is the sort of story that seems to keep happening all over the green energy sector.  Countries (many developing ones) made bets on alternative fuels as a source of economic growth and a step toward sound environmental policy.  But it seems that these industries rely heavily on support from governments, as is the case with solar panels, and that they are very vulnerable to changes in the oil sector–one wonders what will happen to these industries as the shale oil industry grows.

Some of the entries in the blog depart from the topic of energy to discuss other issues brewing in the business news world.

Today I think it is worth taking a look at a recent story about the rise of the Mexican economy and the attraction it has to American investors.

Much of the American discussion concerning Mexico centers around discussions of immigration and the drug war.

That is a shame, says Wall Street Journal reporter Jack Hough in a recent video interview.  It is a relative boomtime for Mexico, fueled largely by growth in Mexico’s manufacturing sector.  The country has enjoyed 4% GDP growth this year.

“When was the last time you saw growth in the US like that? ” Hough said. “Not even Brazil is growing that fast.”

Rapid growth in China, India, Russia, Brazil (so-called BRIC countries) has also inflated wages dramatically, Mexico’s average wage seem more and more attractive to investors in the United States.

Couple that with an important cost businesses are having to factor in–the price of oil.

“The transport costs are much lower (to the United States), because you don’t have to go overseas”, Hough said.

Mexico’s debt is about half of that of the United States (the country also does not have the same sorts of insurance programs such at Medicare/Medicaid or Social Security, which make up a tremendous amount of U.S. government spending).

Hough’s advice to investors looking to invest in Mexico?  Buy Mexican Bonds.

Might also be worth looking into American or Mexican transport companies that travel back and forth across the border.

The three founders of a small New York City startup were having a great time building a group-messaging app called Fast Society back in 2008, and thought they might have a great product on their hands.

But once they arrived in Austin, TX at the annual SXSW to launch the company about one year later, they decided to ditch it.

Matthew Rosenberg, co-founder and CEO Cameo, is not sure pivot is the right word for the dramatic strategic change his company has made.

The “pivot” has been more of an evolution, he says.

Fast Society began when Rosenberg and some friends were having trouble finding each other at a Bloc Party concert, decided an app could fix the problem.

A few days later, Rosenberg and partners Andy Thompson and Matthew Constantiner started building an app that would give groups users a way to communicate and share experiences over their phones.

Smartphones were still relatively new and the industry seemed full of possibility.

“The first iPhone had just come out, and this was probably before you could install apps,” Rosenberg said.”

By the time they arrived at SXSW to launch the app, they found out that the space was already flooded.

There were about thirty other startups in the space, Rosenberg estimates.  A company had developed a service that made it easy to build the backbone needed for an app, and the barriers to entry hit the floor.

“It was insane,” Rosenberg said.  “I guess when you have a good idea everyone has a good idea.”

Suddenly an idea for a simple useful app turned into something that no longer held their interest.  Tons of startups, including competitors such as GroupMe and Beluga (later acquired by Facebook) were all making the same app.  Even Apple had its own offering, called iMessage.

Even the technology seemed boring.

“Everyone had the same feature set at that point” Rosenberg said.  “No one doing anything innovative.  There was no one doing interesting.”

The team all agreed—the point was apparent enough—that it was time to move on.

They left Texas for New York the next day and got back to work.

“We were working on what we thought would be the third version of Fast Society”, Rosenberg said. “And just kept evolving and evolving into something very different.”

Initially, the team wanted to lay text messages over photos taken on users phones at events to create a kind of text and pictures story.

Then they included video, and found video was much more compelling.  They eliminated photo capability entirely to focus on video.

They realized that they had something completely different from what they had set out to make.  They called it Cameo, “to give it its own chance,” said Rosenberg.

Users take video with their phones, and the app renders the video, adds music and forms the clips into a movie.  It does this almost instantly.

Developing the app has taken a lot longer than they had expected.  The technology needed to render video is complicated and the expectations for the app keep growing.

But Rosenberg is happy they left group texting.  There were big expectations for that concept as a business model, but no company in the space has really taken off.

Instead, Rosenberg says, the company has retained the spirit of their original plan.

“Our concept has always been the same, it has been about sharing moments with friends” he said.

As recent reports suggest that the United States may be the worlds’ largest producer of oil by 2020, there are reports from Britain that UK Prime Minister David Cameron’s government is easing up on green energy, and that “green tech” may be neither a significant source of economic growth for the country nor a top political concern.  Some clever reporting by the FT’s Janan Ganesh discusses the road from green enthusiasm to a greater focus on “competitiveness” among British political leadership, and notes also that the the Stephen Harper-led Canadian government withdrew from the Kyoto accord on global warming almost one year ago. 

With another term for Obama there remain some serious questions about whether green energy will remain a priority for the American government.  Without having to worry about reelection, Obama may choose this term to push some political action that might have made him too unpopular last term.  However, his critics will likely continue to remind the public of Obama’s involvement with ill-fated solar company Solyndra, making the road rockier for any Democrat candidate who attempts to fill the President’s shoes in 2016.  Meanwhile, shale oil has managed to remake itself in the imagination of many as a potent source of economic growth, after many years of being demonized as an environmental catastrophe.   A piece by John Bussey back in September mused,

“Thanks to the hustle of innovative U.S. energy companies, the discovery of vast shale gas and oil fields, and stronger national conservation, some forecasts peg energy independence for North America at just a few years off. A Citigroup report calls the region “the new Middle East.” Pimco says the trend is a “game changer.” Bain & Co. declares it a “new paradigm.”

And just a few days ago, the WSJ’s MarketBeat blog declared the Saudi Arabia has been “knocked from its perch”–a statement unlikely to earn many scowls among American readers.   The same piece, by James Herron, proclaims “Oil is up, clean tech is down” and cites research from MarketWatch that subsidies for fossil fuels outstripped those for renewable energy about six-fold. 

Getting back to my actual blog beat after a slew of entries I have made for classes.  Sorry there will be more or those.  But in the meantime, I want to get back to a discussion of a lot of coverage of China’s solar-industry-woes, as of late.  After some recent coverage of the probes into Chinese solar manufacturers suspected of dumping, the New York Times recently published a piece on the ‘glut’ of Chinese solar panels flooding into the global market.

Here is a quote:

“Though worldwide demand for solar panels and wind turbines has grown rapidly over the last five years, China’s manufacturing capacity has soared even faster, creating enormous oversupply and a ferocious price war.”

According to the article’s author, Keith Bradsher, Chinese solar panel manufacturers are losing as much as 30% on sales (up to $1 of every $3, to use his exact words).

This, a skeptic might say, might be bad for the Chinese solar industry, but for the rest of the world, so what?

This is bad, very bad.

Two reasons:

1.  Business in China is still tightly linked to (and funded by!) the Chinese government.  These tremendous losses for these firms are hitting state-owned banks in China hard.  NYT’s Bradsher reports that state-owned banks have supplied these companies with approximately $18 Billion in low-rate loans, while more local governments in China have supplied their own loans and sold land and capital equipment to these firms at steep discounts.

2.  A glut may give way to a famine–and famine prices.  At least for a period long enough to drive up prices.  It is still too early to tell, but consider the evidence so far. China has been slowly knocking out competitors in most of the few other countries that produce solar panels.  Hence the probes spurred by the complaints of European companies.  These reports are incomplete, and defenders of China’s solar industry challenge many of the claims against them. The EU (and some American) solar producers have alleged that Chinese companies are benefitting from big handouts from the central government, and are thus leveraging these subsidies to sell their products are prices well below market value.  If Bradsher’s $18B figure is accurate, than we can assume that they are receiving a fair amount of money from a government that wants to support a potentially key industry in the energy sector.  Even with subsidies (or subsidies in the form of attractive loan terms, cheap land and equipment

Chinese solar requires these subsidies if it expects to compete with Chinese coal–which is 30% of the price of solar, Bradsher reports.  The government would like to see consolidation in its wind and solar industry (and European countries–who make up the world’s largest market for solar panels, would like to see a more even field for their own producers).  This begs me to wonder, can Chinese solar companies compete without generous government support, and what will happen to solar panel production if China stops or shrinks panel and wafer production?

The name Solyndra comes to mind….or not

Hey all,

This week I take another brief departure from writing about energy to fulfill some grad school requirements.  Enjoy.

The Ted Baker Store on the corner of Mercer and Grand Streets in SoHo

There is not one SoHo, but many Sohos. In recent years the area has become a hub for shopping and restaurants, particularly those that cater to high-end fashion shoppers.  You can find everything from Ted Baker, Ralph Lauren, and Prada to Nike and Hollister.  The area is a place where well-heeled New Yorkers walk alongside tourists from all over the world.  What you are buying depends largely on where you are from.

The pricing of American brands and the overall selection of goods available in New York are very attractive to tourists hailing from other countries.

“The Italian brands are more expensive here than they are in Europe, so we are more interested in the American brands”, said Sasha Zidansek, a Slovenian woman who came to New York on business. Zidansek, who works for IBM.  “I mean, Nike in Slovenia? Come on.”

Danny Mieles, a sales associate at 3X1 Denim on Mercer Street, said they draw customers from all countries and all professions for their ready-to-wear, custom made, and bespoke raw denim jeans.

“We get a lot of people from Australia, and Brazil,” Mieles said.  “We get professional athletes, wealthy businessmen.”

3X1 gets little press in American media, but was featured on a Brazilian travel show called “Manhattan Spotlight”.   The exposure gave them an increase in Brazilian customers.

Rudy Young, who works for a small high-end French brand called Surface to Air, said their block of Mercer Street (a few doors down from 3X1) was not even considered part of SoHo a few years ago.  The label has only three stores in the world—in Paris, Brazil, and New York—so their customers likewise come from all over the world.

Young agrees that there are different SoHo’s.  The store offers its guests a map of stores and restaurants they advise their customers to visit.

“These are places we think are aligned with our aesthetic,” Young told me as he pointed to the map.

Some people are not necessarily here for shopping.  Pelin Ozer, a businesswoman from Turkey, was not in SoHo to buy anything, but said friends told her to visit the area.

Wearing an “I (heart) NY” hooded sweatshirt, Ozer stopped to ask me for directions to SoHo.  She had several printed pages of advice from friends in Istanbul on places to visit while in New York.

She saw Prada and a few stores, but they have many of those in Istanbul, she said.  Besides she was not in New York to shop.

“I am here to see the sights,” she said.

Frick_NYHerald

On July 22, 1892 a young man named walked into the offices of the Carnegie Steel Company in Pittsburgh, Pennsylvania, eager to execute a plan he had devised with his girlfriend.  He was a “dark-complexioned young man with a Jewish cast of countenance, of medium height and fairly well-dressed”, wrote the Grand Forks Herald.  He had been in the building several times in the previous few days, so when he asked to be let off the elevator at the second floor and directed toward the chairman’s office, the elevator operator “thought nothing of the request” and showed him the way.

The young man was there to find an industrialist named Henry Clay Frick and to put an end to “a great struggle going on between capital and labor in this city”.

He had at his disposal a revolver and something the Grand Forks Herald called a “dagger”.

About two minutes later, three rapid gunshots startled people in and around the building, the paper reported.

“Intuitively the victim was divined and ‘Frick was shot’ were the words soon passing from mouth to mouth on the street”, the newspaper read.

Mr. Frick, an infamous industrialist who was the chairman of the Carnegie Steel Company (yes, that Carnegie) had survived an attempt on his life by a young Russian idealist named Alexander Berkman, who had planned the steel-boss’s murder with Emma Goldman, a woman who had been a prominent figure in anarchist circles, women’s movements, and draft resistance.

The particular grievance against Frick was an intractable and hostile dispute between the Carnegie Steel Company and a labor union at a facility in Homestead, Pennsylvannia.

The first shell did not explode.  The second lodged itself in Frick’s neck.

Frick then “made an exclamation” and vainly tried to climb out of a window.  Berkman walked to the desk, and fired into Frick’s neck again.  The bullet “entered the muscle on the back of the neck and passed around to the lodgment under the right ear…” said the story.

The paper mentions the heroic efforts of John Leishman, another executive at the Carnegie Steel Company, though the writer of the piece manages to misspell Leishman’s name five times, and in two different ways—3 for Leshman and two for Lesham.  I would not have known to check if there had not been the discrepancy.

In any event, Leishman pounced on the assailant and wrestled him to the ground.  They fought for the revolver, which then fired again into the ceiling.

Frick, with two bullets in him, saw Berkman draw a knife in the tussle with Leishman.   As Frick tried to jump between them, Berkman stabbed Frick three times, though we are told, “he was merely scratched at these last attempts to kill him”.

A man identified as Sheriff May had, by this time, entered Frick’s office and was about to shoot Berkman when Frick shouted “Don’t kill him.  We have got him all right.  Leave him to the law.”

A few minutes later, several doctors were present.  Both the Grand Forks Herald and the New York Herald reported that Frick was soon the calmest man in the room.  He eventually made a full recovery.

From time to time I watch a crime show on television and muse at the ridiculous plots that seem both far-fetched and dog lame.  Often someone will remind me that TV writers—perhaps because they are TV writers—poach material for their plots from news stories.  Often they even have to tone down some elements of the true stories they borrow to make them believable.

I don’t know if I believe this news story as it is told here.  I would like to read more accounts of it and identify incidents of variance among them.

But I chose this story because it popped into my head when trying to find something to write about for a graduate school assignment on historical news research. Henry Clay Frick, and the attempt on his life by a member of the anarchist movement of the late 19^th Century are fascinating for the story they tell and for what they represent.

This was a remarkably fertile time for the American economy.  The Civil War had just ended, industrialism was on the rise, there were some of the first true tycoons of the country—people like Vanderbilt, Carnegie and Frick.  These men were merciless businessmen who later bequeathed large portions of their wealth to education and culture.  Frick would later donate his entire Manhattan estate and all of the art in it to the City of New York—what we now know as the Frick Collection on the Upper East Side.

On the other hand, he is often reviled as a brutal businessman, who became obsessed with breaking the strike at Homestead.

Then, there are people like Berkman and Goldman: both fanatical, idealistic, immigrants who occupy strange places in history, not terribly unlike those of John Brown and Che Guevara.  We do not really know what to make of them. Should we like or admire them at all?  Berkman and Goldman were trying to stand up for the rights of workers and had been involved in progressive causes.  But the assassination attempt seemed actually to turn public opinion against the strike.  In another article in the New York Herald, another story about the assassination read,

“In the business community of Pittsburgh, there is the deepest indignation and a feeling of revolt against the tyranny of unionism, which has so long, with threats and strikes and boycotts, absolutely dominated the community, and now, in the excited minds of men of substance, has indirectly resorted to assassination to carry out its purposes.”

When he was finally arrested, as this story from the Grand Forks Herald says, Berkman had very little on him: a few thirty-eight caliber bullets, some pieces of candy and a nickel-plated watch.  When officer finally sat Berkman down in a chair, Police Surgeon O’Meara noticed that the young man was moving his jaw oddly.  The police officer then choked the man until he was “nearly black in the face”, whereupon Berkman spit out a small shell of dynamite “of the same kind used by Lingg, the Chicago anarchist, to blow himself up.”

This is the second post I have written so far on the recently launched probe by the European Union into whether Chinese solar panel producers have been “dumping” panels onto the European market.  

Joshua Chaffin wrote today in the FT’s online Brussels Blog that China faces an “uphill battle” in the fight against the probe, and against the anti-dumping tariffs that are likely to result from the investigation.

First, European officials say that more than half of the probes of this sort undertaken by the European Commission result in tariffs.  

But Chaffin also noted two interesting issues in the EU’s trade relationship with China. 

One deals with a reform resulting from the Lisbon reform treaty that requires a much higher majority of EU member states to reject a commission recommendation—in this case the imposition of tariffs.  Previously, it was a bit easier to obtain enough support to kill an undesirable recommendation.  Later this year, it will be a bit tougher. Chaffin suggested that foreign governments (Beijng and Washington, by name) had an easier time knocking down unfriendly tariffs by appealing to enough EU member states.

But in some ways the more intriguing point lies in the fact that the European Commission, the executive branch of EU government, has long-designated China as a “non-market economy”.

I have to write more on how the EU actually arrived at this designation, but basically it is defined by the World Trade Organization (WTO) (see this article).

Some online resources on dumping from the WTO refer to non-market economies as

“economies where the government has a complete or substantially complete monopoly of its trade and where all domestic prices are fixed by the State.”

What this means for the current solar panel dispute, said Chaffin, is that the European Commission will designate a third country as a kind of reference point in determining the fair price of solar products in the EU.

Guess whom they have chosen?  The United States of America. 

This, of course would be horrible for China’s case, since manufacturing costs in the U.S. are often much higher and would further lend the appearance that Chinese products, by comparison, are sold at far too low a price point to be legitimate.  Labor costs are still vastly different in these two countries. 

This may also come as a bit of shock to many Americans, as it is precisely competition from low-cost Chinese manufacturing that is often blamed for the loss of American jobs.  This is especially apparent during election seasons.

For a country such as China that pegs its currency, tightly controls foreign investment, and is populated with large, state-owned corporations, perhaps such a reference point is appropriate.  But can the US really be a reliable reference point against Chinese solar panel prices if the American government had to take the same action the EU is currently considering? 

Chaffin pointed out that when the EU imposed tariffs in Chinese shoe manufacturers, they used Brazil as a reference point. The Chinese government would have preferred than a country like Indonesia, which, they argued, had more comparable labor costs. 

It is important to remember that the real charge European companies have made in this complaint is not simply that Chinese solar panel producers are under-pricing European manufacturers.  They are alleging that Chinese producers are selling products at prices below their own manufacturing costs.