U.S. Economist Warns Against Using Overcapacity as Excuse for Protectionism
A number of Western governments and media outlets have recently highlighted issues related to “overcapacity” in the Chinese mainland’s new energy industry, expressing concerns for domestic companies and markets.
They argue that the Chinese mainland’s clean energy products—including solar power, new energy vehicles (NEVs), and lithium-ion batteries—exceed domestic demand and what the global market can bear, leading to depressed market prices and negatively affecting workers and manufacturers in their countries.
However, U.S. economist Nicholas Lardy cautions that the overcapacity argument risks becoming an excuse for protectionism, ultimately hindering global economic growth.
An Excuse for Protectionism Hurts Every Economy
“This overcapacity idea is that you shouldn’t produce more than you can sell domestically. If that was carried to an extreme, that would mean no trade globally,” said Lardy, a senior fellow at the Washington D.C.-based Peterson Institute for International Economics, in an interview with Xinhua News Agency.
“So Boeing should cut its production? U.S. soybean farmers should limit their production to what can be sold within the United States?” questioned Lardy.
He warned that using the excess capacity argument as a justification for protectionism could result in “a complete and utter disaster for every economy.”
According to the International Energy Agency’s (IEA) Global EV Outlook report issued last year, global sales of NEVs are estimated to reach 45 million units in 2030, three times the 2023 figure. The Chinese mainland’s NEV sales in 2023 were around 9.5 million units, with exports totaling 1.05 million, far lower than those of Germany, Japan, and the Republic of Korea (ROK).
“Those who use overcapacity to justify protectionism have nothing to gain and will only destabilize global industrial and supply chains, harm emerging sectors, and hinder the world’s climate response and green transition,” said Lin Jian, spokesperson for China’s Ministry of Foreign Affairs, at a press conference on Friday, responding to Western concerns.
Reference(s):
Overcapacity as excuse for protectionism is damaging: U.S. economist
cgtn.com
