EU and China resolve amicably solar panel trade dispute

Karel De Gucht, Member of the European Commission in charge of Trade, gave a press conference on 4 June 2013 following the EC decision to impose provisional anti-dumping duties on imports of solar panels, cells and wafers from China. (EC Audiovisual Services, 04/06/2013).

Exactly ten days after the European Sting predicted on 19 July that most likely EU and China would soon settle their long time dispute on solar panels, Commissioner De Gucht confirmed last Saturday: “We found an amicable solution in the EU-China solar panels case that will lead to a new market equilibrium at sustainable prices”. In detail the Sting wrote “There is information though that the EU Trade Commissioner De Gucht may be convinced to drop the 47.6% super anti-dumping levy on Chinese solar panel imports, scheduled to be imposed as from 6 August”.

The agreement

The whole idea of this agreement is that instead of the EU imposing a large anti-dumping levy on imports of solar panels of Chinese origin, this country’s producers participating in the agreement undertake the obligation to increase their selling prices. Obviously this price increase would be lower than the 47.6% super anti-dumping levy threatened to be imposed by the EU as from 6 August.

The Sting has been following this affair for many months. From the very first moment this newspaper doubted that the solar panel case could lead to an all-out economic confrontation, let alone trade war, between those two economic superpowers. There is so much at stake in the EU-China relations that not even at the most difficult moment of this case the Sting didn’t believe that the solar panel case could lead to a major commercial conflict between the two world powers.

Difficult moments

The difficult moment was when the Chinese Ministry of Commerce (MOFCOM) issued a decision saying that, “In accordance with the examination results above and the provisions of Article 16 of the Regulations of the People’s Republic of China on Anti-dumping, the Ministry of Commerce decided to initiate an anti-dumping investigation against imports of wines originated in the EU starting from July 1, 2013”. This action came after the European Union announced that as from 6 August the Union will impose a super anti-dumping levy of 47.6% on solar panel imports of Chinese origin.

In any case the dispute is now over, after EU Trade Commissioner Karel De Gucht clearly stated that “After weeks of intensive talks, I can announce today (27 July) that I am satisfied with the offer of a price undertaking submitted by China’s solar panel exporters, as foreseen by the EU’s trade defence legislation. This is the amicable solution that both the EU and China were looking for…Upon consultation of the advisory committee composed of Member States, I intend to table this offer for approval by the European Commission.”

The presentation of the offer by the Chinese exporters resulted after many weeks of intensive talks. Actually the talks intensified following the imposition of a small provisional anti-dumping duty on EU imports of solar panels from China as from 6 June. The duty was planned to be imposed in two steps, starting with 11.8% on 6 June and 47.6% on average on 6 August. As a matter of fact the negotiating teams were flown to Beijing to continue their talks during the 27th EU-China Joint Committee at the end of June.

As the Commission explains, the “price undertakings are a form of an amicable solution in trade defense proceedings permitted by the WTO and EU laws”.  In reality it is an alternative form of a measure. A duty is replaced by a price increase undertaking which will constitute from now on the base of a minimum import price. Those exporting Chinese companies participating in the price undertaking will be subject to its term, that is to substantially raise their selling prices while exporting to the EU. Their exports will be exempted from the anti-dumping duties but the firms will undertake the obligation not to sell at lower prices than the undertaking.

Undoubtedly this agreement on the solar panel issue is a major breakthrough in the overall relations between EU and China. The affair has taken large dimensions due to    exploitation by a number of international media which ‘could see’ severe repercussions in the EU-China relations from this dispute. At the same time the core of the matter was not at all small for both sides. In China the solar panel industry, the largest by far provider of the global solar energy sector, suffers from excess over capacity and is currently under severe pressures with large producers threatened with bankruptcy.

EU side

On the EU side the solar energy production boom which was fuelled by oversized subsidies in many countries, like Greece and Germany, had come to a dead-end. No EU country could continue subsidising solar energy production at that levels. So the EU solar energy industry had to cool down. However the severe reduction foreseen in EU solar energy investments could completely destroy the home production of expensive panels, which could sell easily in the good times. That’s why the Commission intervened, to save the EU home production of solar panels by forcing the Chinese to substantially raise their selling prices.

Apparently the agreement struck this Saturday must be a just partitioning of damages.  Some Chinese and some EU solar panel producers will have either to close down or downsize. Why? Because with solar energy production subsidies severely cut down and the cost of investments going up, following the Chinese panel price increase, demand for panels will fall abruptly and producers will suffer.