If the tin cartel shows the danger of a managed band, Europe’s recent experience shows the danger of getting the floor right in form but stripping out the one feature that makes it work — the tariff. In 2013, at the close of the largest anti-dumping case it had ever brought, the European Union declined to collect the duties it had calculated against dumped Chinese solar panels. Instead it accepted a “price undertaking”: a minimum import price of €0.56 per watt, paired with an annual quota of roughly seven gigawatts that could enter duty-free, the whole thing administered through China’s own chamber of commerce. Brussels had found massive dumping — and then agreed not to tax it.
This is the crucial point, and it is precisely backwards from Lowell’s design. A real minimum import price is enforced through the tariff: when an importer declares a value under the floor, the government disregards the importer’s customs declaration and assesses the ad valorem tariff against the minimum import price. Europe’s “MIP” collected nothing.
Look closely at what the European bare MIP floor actually does — and does not do. It does not take a single dollar of margin out of the import transaction. It ignores that money is fungible, providing a windfall to foreign vendors who can use that extra money to buy marketshare, whether through rebates, marketing, or any other avenue where money buys results.
For example, presume that Chinese solar panel manufacturers were invoicing at €0.40 per watt prior to Europe’s €0.56 per watt minimum import price. Perhaps €0.56 per watt was presumed to keep European manufacturers competitive. However, in this scenario, assuming no fraud, the Chinese solar panel manufacturer is awarded a massive cash windfall – keeping the additional €0.16 per watt that Europe commanded. That extra margin can be used to rebate customers, dealers, or otherwise invest in local sales.
Defenders of the undertaking treated that as a technicality: the European buyer pays €0.56 either way, so why fuss over who pockets the difference? The answer is that it matters enormously, because money is fungible. The Chinese manufacturer is under no obligation to leave its windfall inside the panel it just sold. It can move that cash to the next factory, the next price war, the next country’s market. A minimum price that collects no duty does not neutralize the dumping advantage; it refinances it — and aims it straight back at you. That is the absurdity at the heart of the European scheme: it disciplined the headline price on paper while leaving the cheater’s war chest fully funded.
This is the strongest argument of all for the American textile model. The duty does what a bare floor never can: it physically removes the margin from the deal at the border and deposits it in the Treasury, where it cannot be recycled into the conquest of the very market it just entered. A floor enforced through a tariff takes the money out of the transaction. A floor without one merely announces a price and waves the cash through. The first is a remedy; the second is a subsidy wearing a stern face — and the subsidy runs to the foreign producer.
The consequences in solar followed inevitably from that structure. The floor handed roughly seventy percent of the European market to Chinese suppliers at a protected price; the lead European complainants called it not a settlement but a capitulation. The guaranteed margin financed exactly what one would expect — more Chinese capacity, lower Chinese costs, and a redoubled push into the very market the measure was supposed to defend. What the undertaking did not finance, Chinese producers got around, routing cells and modules through Taiwan and Malaysia until Brussels extended the measures to cover the trans-shipment, and getting several firms thrown out of the arrangement for selling below the floor through side deals. And the domestic industry it was all meant to save? SolarWorld, the German champion that had led the complaint, filed for insolvency in 2017 and again in 2018; the measures were allowed to lapse that September. Europe achieved the rare double failure: it subsidized its adversary’s margin and lost its own producers anyway.
Minimum Import Price: The Good American Tradition Versus the Failed Globalist Design
Before USTR borrows the tin cartel's playbook, it should look to the American tradition of minimum import pricing — and beware the foreign imitations that ended in ruin.
When the Office of the U.S. Trade Representative opened its docket this February on a multi-country agreement for critical minerals, it tucked a revealing question into the request for comments. Among the “reference measures” it asked the public to weigh was the International Tin Agreement — the commodity scheme that took effect in 1956 and ran for twenty-nine years. USTR wanted to know whether the tin model offered useful design lessons for the “price mechanisms” it is contemplating to keep American mines, refiners, and processors alive against a flood of subsidized Chinese supply.
It is the right instinct reaching for the wrong precedent. United States customs valuation laws are in fact a joke. Our ad valorem tariffs – the ones everyone is familiar with, expressed as a percentage – are assessed against whatever the declaring entity claims they paid overseas.
How bad is the status quo? The 46% drop in our trade deficit with China has been entirely driven by traders simply providing customs with lower price declarations, masking the fact that imports from China are actually up. This is why CPA champions widespread use of ‘specific’ tariffs, which are assessed not against a declared price, but against something that a customs officer can verify in front of him: weight, count, and so on. While not as well known, they exist on many products in the U.S. tariff schedule, and have been used since the dawn of civilization.
Still, as specific tariffs have always been around, so will ad valorem (%) tariffs. Many tariff categories in the tariff schedule are “catch-all” or “basket” categories, where coming up with a specific rate by itself isn’t necessarily viable, and ad valorem assessments make sense.
But our ad valorem valuation-rules need not be the fraud-a-thon they are today.
Indeed, prior to the GATT era, U.S. customs law offered solutions to mitigate customs declaration fraud. We should not import from the failed London international cartel model. The American tradition offers simpler, more elegant solutions that proved far more successful than anything the International Tin Council ever managed.
The American invention
The mechanism was born in the Tariff of 1816 — the “Dallas Tariff,” named for Treasury Secretary Alexander J. Dallas, who carried it into law. Its author was not a government economist but an American manufacturer: Francis Cabot Lowell of the Boston Manufacturing Company, the man who had memorized Britain’s guarded power-loom designs and rebuilt them in New England. Lowell’s design was elegant. Rather than trust the foreign exporter’s self-declared invoice, the statute set a floor value below which an imported cotton cloth simply could not be entered. Any cloth “the original cost of which… shall be less than twenty-five cents per square yard,” the act read, “shall… be taken and deemed to have cost twenty-five cents per square yard, and shall be charged with duty accordingly.”
That phrase — deemed to have cost — was the whole game. The duty was assessed not on what the importer claimed to have paid, but on a statutory floor. Lowell’s stated purpose, as the historian Edward Stanwood recorded, was twofold: to “keep the India goods out” and to “stop the undervaluation of English goods, which was already becoming a serious grievance.” In other words, the very first American minimum was an anti-fraud, anti-undervaluation device — a wall against the customs-house cheating that has bedeviled every tariff before and since.
It worked, and the country’s leaders extended it. John C. Calhoun — then a nationalist, before nullification — whipped the House to pass it. Henry Clay made it a pillar of his American System, raising the cotton floor to thirty cents in 1824 and to thirty-five cents in 1828, when Congress also extended the principle to four graduated grades of woolens. The effect could be ferocious. John Quincy Adams explained on the House floor that under the 1828 woolens minimum, a fabric costing a dollar and one cent a yard was valued at the custom house at two dollars and fifty cents and taxed accordingly — an effective rate north of one hundred percent. The minimum had quietly converted a moderate ad-valorem duty into something close to a specific one.
Here was the genius of the design: the floor was automatically countercyclical. As the British dumped and nominal prices fell, the fixed floor bit harder, and protection rose precisely when domestic producers needed it most. No council had to meet. No buffer stock had to be financed. The floor sat in the statute and did its work at the border. It built the Waltham and Lowell mills and the New England woolens trade — until Democrats’ radical free-trade Walker Tariff of 1846 swept the minimum system away.
The twentieth-century descendant: American Selling Price
The principle did not die in 1846; it resurfaced when the country next faced an existential industrial threat. Before the First World War, Germany held a near-monopoly on synthetic organic chemicals and dyes. When the war cut off German supply, American firms built the industry from scratch — and faced annihilation the moment German cartels were free to resume dumping at war’s end.
Congress answered in the Fordney-McCumber Tariff of 1922 with the American Selling Price. Free-traders kept it from applying across the board, but it was deployed where the bleeding was severe: for coal-tar chemicals and dyes, the dutiable value would be the price of the competing American product, not the foreign exporter’s invoice. It was Lowell’s logic carried forward — refuse to let the foreign seller set the number against which his own goods are taxed — and it preserved a domestic chemical industry now indispensable to everything from pharmaceuticals to munitions. ASP later covered a handful of other goods, from rubber footwear to canned clams to wool-knit gloves, and it survived until 1979, when the United States repealed it after the GATT Tokyo Round banned customs valuation policies that fought fraud.
Nonetheless, between 1816 and 1979, the American minimum import pricing rules were designed for effectiveness: a simple price floor, written into our own law, administered at our own customs house. It needed no ‘policing’ or discretion to administer. It costs the Treasury nothing — indeed it protects a minimum revenue. And it effectively protects the home market from dumping.
How the tin cartel actually died
Now set that beside the model USTR is being urged to study. The International Tin Agreement was not a tariff floor at all. It was a multilateral commodity cartel of producer and consumer governments, run by the International Tin Council in London, that tried to pin the world price of tin inside a band — above a floor and below a ceiling — using two tools the American minimum never required: a physical buffer stock that governments had to bankroll, and export restraints that producing countries had to police. To hold the band, a single official in London, the Buffer Stock Manager — for years a Dutchman named Pieter de Koning, described in his prime as the most powerful man in the world tin market — sold metal when the price threatened the ceiling and bought metal when it sagged toward the floor.
A fatal flaw was its complexity and foolhardy attempt to control prices internationally. Producers outside the agreement — chiefly Brazil and China — expanded aggressively to sell into the umbrella the Council was holding up, while tin’s own customers designed it out, as aluminum and plastic displaced the tin-lined can. The Council’s grip on world output slid from roughly 71 percent in 1981 to about 57 percent just four years later; Brazil alone quadrupled its share. The cartel was now propping up a price for a shrinking slice of a market it no longer controlled, with the free-riders banking the difference.
Holding the floor under those conditions meant buying more and more tin with money the Council did not have. De Koning kept the scheme alive by hiding the scale of it — borrowing against the stockpile and piling up forward commitments to buy tens of thousands of tonnes of tin that the Council could not pay for, positions concealed from the market until the very end. On October 24, 1985, the money ran out. The Buffer Stock Manager informed the London Metal Exchange that he could no longer support the price. Tin went into free fall, and the Council stood revealed as insolvent — some £900 million, about $1.4 billion, owed to the banks and brokers who had financed the defense of the floor. The Exchange suspended tin dealings for years. Brokerage houses failed. It became known simply as the tin crisis, the textbook case of a buffer-stock cartel destroyed by its own price target.
Then came the part every American negotiator should commit to memory. When the creditors came to collect, the sponsoring governments — two dozen of them — refused to stand behind the Council they had created and directed. The creditors sued the member states directly, and lost: the British courts, up through the House of Lords in the Rayner (Mincing Lane) litigation, held that the Council’s separate legal personality shielded its members from liability for its debts. In December 1989 the claims were settled out of court for a fraction of what was owed. The banks and brokers ate the losses; the governments walked away. It’s difficult to imagine why USTR is even considering it as a design precedent: a body that set its price too high, bankrupted itself defending it, and then hid behind legal immunity to stiff its creditors, while facilitating other countries stealing market share. The United States, having refused to fund the buffer stock even after it finally joined in 1976, was one of the few governments not left holding the bag.
Europe's other mistake: a minimum import price with no tariff
If the tin cartel shows the danger of a managed band, Europe’s recent experience shows the danger of getting the floor right in form but stripping out the one feature that makes it work — the tariff. In 2013, at the close of the largest anti-dumping case it had ever brought, the European Union declined to collect the duties it had calculated against dumped Chinese solar panels. Instead it accepted a “price undertaking”: a minimum import price of €0.56 per watt, paired with an annual quota of roughly seven gigawatts that could enter duty-free, the whole thing administered through China’s own chamber of commerce. Brussels had found massive dumping — and then agreed not to tax it.
This is the crucial point, and it is precisely backwards from Lowell’s design. A real minimum import price is enforced through the tariff: when an importer declares a value under the floor, the government disregards the importer’s customs declaration and assesses the ad valorem tariff against the minimum import price. Europe’s “MIP” collected nothing.
Look closely at what the European bare MIP floor actually does — and does not do. It does not take a single dollar of margin out of the import transaction. It ignores that money is fungible, providing a windfall to foreign vendors who can use that extra money to buy marketshare, whether through rebates, marketing, or any other avenue where money buys results.
For example, presume that Chinese solar panel manufacturers were invoicing at €0.40 per watt prior to Europe’s €0.56 per watt minimum import price. Perhaps €0.56 per watt was presumed to keep European manufacturers competitive. However, in this scenario, assuming no fraud, the Chinese solar panel manufacturer is awarded a massive cash windfall – keeping the additional €0.16 per watt that Europe commanded. That extra margin can be used to rebate customers, dealers, or otherwise invest in local sales.
Defenders of the undertaking treated that as a technicality: the European buyer pays €0.56 either way, so why fuss over who pockets the difference? The answer is that it matters enormously, because money is fungible. The Chinese manufacturer is under no obligation to leave its windfall inside the panel it just sold. It can move that cash to the next factory, the next price war, the next country’s market. A minimum price that collects no duty does not neutralize the dumping advantage; it refinances it — and aims it straight back at you. That is the absurdity at the heart of the European scheme: it disciplined the headline price on paper while leaving the cheater’s war chest fully funded.
This is the strongest argument of all for the American textile model. The duty does what a bare floor never can: it physically removes the margin from the deal at the border and deposits it in the Treasury, where it cannot be recycled into the conquest of the very market it just entered. A floor enforced through a tariff takes the money out of the transaction. A floor without one merely announces a price and waves the cash through. The first is a remedy; the second is a subsidy wearing a stern face — and the subsidy runs to the foreign producer.
The consequences in solar followed inevitably from that structure. The floor handed roughly seventy percent of the European market to Chinese suppliers at a protected price; the lead European complainants called it not a settlement but a capitulation. The guaranteed margin financed exactly what one would expect — more Chinese capacity, lower Chinese costs, and a redoubled push into the very market the measure was supposed to defend. What the undertaking did not finance, Chinese producers got around, routing cells and modules through Taiwan and Malaysia until Brussels extended the measures to cover the trans-shipment, and getting several firms thrown out of the arrangement for selling below the floor through side deals. And the domestic industry it was all meant to save? SolarWorld, the German champion that had led the complaint, filed for insolvency in 2017 and again in 2018; the measures were allowed to lapse that September. Europe achieved the rare double failure: it subsidized its adversary’s margin and lost its own producers anyway.
Lowell over the Tin Council
Lay the three side by side and the lesson writes itself. The tin cartel tried to manage a band with a ceiling, defended it with a buffer stock, and went bankrupt when the cash ran out — leaving its own creditors holding the bag. Europe set a floor but refused to put a tariff behind it, and so paid the dumping margin straight to the dumper. The American minimum did neither. It sets a floor and no ceiling, so it never caps what a domestic producer can earn. It holds no inventory, so it cannot run out of money the way a buffer stock must. It is a line in our own tariff schedule, so no council of foreign governments can vote it down and no doctrine of international immunity can be raised against the public it serves. And because it is enforced through the duty, the gap between the cheater’s price and the floor is captured here, as revenue for the Treasury — never gifted to the foreign exporter as a guaranteed margin. It is countercyclical by design, doing its heaviest work exactly when subsidized imports are crashing the market — which is the moment critical-mineral producers face right now.
USTR asked the public whether the tin agreement holds design lessons for critical minerals. It does — chiefly the lesson of what to avoid, with Europe’s solar floor as the cautionary footnote. The answer to Chinese overcapacity in polysilicon, rare earths, and refined metals is not a buffer-stock cartel that the United States was wise enough to shun for two decades and that collapsed under its own weight, and it is certainly not a bare price undertaking that pays our competitors to bury us. It is to reach back to Lowell, Dallas, and Clay, and to put a floor under the American producer the way this country did for the better part of its first century — unilaterally, durably, enforced through the tariff, and on our own terms.
MADE IN AMERICA.
CPA is the leading national, bipartisan organization exclusively representing domestic producers and workers across many industries and sectors of the U.S. economy.
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