Economic Outlook: Sparring with China The U.S. government fired a salvo in the trade war with China this week, granting a moral victory for domestic firms that make solar panels. The Commerce Department announced it would impose punitive tariffs on Chinese solar panels, declaring Beijing was unfairly subsidizing the solar panel industry in China. China has done this, media reports say, with tax breaks and low interest loans to companies, some of which have confirmed they used the loans to buy land to set up their production facilities. Honestly, this sounds at least vaguely familiar. The U.S. government, through the Department of Energy, has been helping to fund research and development of all manner of renewable energy sources. In addition, loans to solar panel companies in the United States have made plenty of headlines in recent years, alternative energies being a major focus of the Obama administration. And these days, it seems, a company with more than three employees can get any manner of county or municipal tax breaks to ensure those valuable jobs stay in their communities. Any company that has a choice of a location also has the ability to play one hapless county executive against another until their tax bills practically disappear. Last summer, a government loan of $500 million to Fremont, Calif., solar panel company Solyndra failed to keep it from going bankrupt, clearly demonstrating the one-eye-closed approach to judgments on solar panel subsidies. One wonders if it's not so much the Chinese subsidies that are the issue, but rather that the Chinese subsidies actually work whereas the U.S. subsidies apparently do not. From 2005 to 2011, The New York Times reports, China's share of the U.S. solar panel market grew from $21 million to more than $2 billion. Along the way, China went from bit player to producer of half the panels sold in the United States. However, the phrase "all subsidies being equal," simply does not apply here. Beijing's generosity goes to companies that can still pay workers $250 per month. That is where the United States cannot compete. Subsidies to companies and the imposition of punitive tariffs are only the policies that are within relatively easy reach of U.S. officials. The Chinese policies U.S. companies need to fear are are not tax breaks. The policies that put on a different playing field than China are, very roughly speaking, the same policies that define the differences between Germany and Greece. It's not that the subsidies are so unfair, but labor laws, pollution control expenses for companies, unemployment benefits, workmen's compensation laws, minimum wage laws, judicial rights and a whole raft of other policies are where the true inequalities lie. To level the playing field between China and the United States, the solution is not tariffs of 4 percent or even 50 percent. To level the playing field, it is necessary to start from scratch. The tariffs, in that sense, look like they are about subsidies, but they are really about inequalities that go well beyond the office of the U.S. Trade Representative. In international markets Wednesday, the Nikkei 225 index in Japan fell 0.55 percent, while the Shanghai composite index in China rose 0.06 percent. The Hang Seng index in Hong Kong slid 0.15 percent, while the Sensex in India rose 1.65 percent. The S&P/ASX 200 in Australia gave up 0.48 percent. In midday trading in Europe, the FTSE 100 index in Britain was flat, falling 0.06 percent, while the DAX 30 in Germany shed 0.21 percent. The CAC 40 in France slid 0.15 percent, while the Stoxx Europe 600 slid 0.19 percent.