EU Commission retracts on the Chinese solar panel case

In an unexpected move the European Commission announced on Wednesday 7 August that it “…continues anti-subsidy investigation on solar panels from China…”, and this only a few days after Commissioner Karel De Gucht, responsible for foreign trade had announced on 27 July that the issue had been concluded ‘amicably’ between Brussels and Beijing. In contrast to that De Gucht said last Wednesday that “in this case, the investigation will continue without provisional measures and the Commission will continue working actively on the case in order to arrive to definitive findings that are due at the end of this year”. According to this announcement the anti-subsidy investigation will be running in parallel to the EU’s anti-dumping investigation on solar panels as was initiated on 8 November 2012 upon a complaint by the Union industry. However the two investigations had been running in parallel for many months now and understandably the ‘amicable’ agreement between Brussels and Beijing adequately covered the damage to the European solar panel industry. De Gucht himself on 27 July has stated “We found an amicable solution in the EU-China solar panels case that will lead to a new market equilibrium at sustainable prices”. What made the Commission to retract so openly, risking more counter action from Beijing? The answer has to be looked for in the way the major international media interpreted De Gucht’s ‘amicable agreement’. Commentators concluded that the European Commission had bowed to the will of Berlin. On 27 May the European Sting writer George Pepper stressed that “The visit of the new Prime Minister of the People’s Republic of China and party secretary of the State Council, Li Keqiang to Germany paid tangible dividends. After meeting with the German Chancellor Angela Merkel he got an official and public promise from her that Berlin will intervene in the Brussels procedures, to cool down European Commission’s aggressive action against alleged Chinese state subsidies to a number of companies and their possible price dumping practices in EU markets.“ On that occasion Keqiang’s visit to Europe was restricted only to Berlin. Germany is not only the largest by far EU exporter to China. Many German giant automotive and other engineering firms are making a large part of their profits from their sales in China. It is too much of a risk for Berlin to start a trade war with Beijing. That is why Merkel came out so openly backing Beijing over its trade disputes with the European Commission. Consequently world media interpreted De Gucht’s ‘amicable’ arrangement with Beijing as a capitulation of the European Commission to the will of Berlin. Seemingly this proved to be too much for the Commission to stomach and the EU’s executive arm had to do something to mitigate the exposure. To this effect De Gucht now tries to separate the anti-dumping from the anti-subsidy investigation over the Chinese solar panel selling prices. The dumbing issue however has been resolved ‘amicably’ on 27 July with the Chinese producers having agreed to raise the selling prices of their solar panels exported to the EU and the Commission agreeing that this was enough “to lead to a new market equilibrium at sustainable prices“. Now however De Gucht says that “The agreement on an undertaking announced on 27 July 2013 is based on the provisional measures imposing anti-dumping duties. The undertaking entered into force on 6 August. The Commission has expressed its readiness to follow the necessary procedures to include the anti-subsidy investigation into the undertaking at the definitive stage, should such action be warranted”. In short the Commission now backtracks on its decision and says what the Chinese accepted under the ‘amicable agreement’ might not prove enough and the EU may increase the undertaking. This means that the obligation the Chinese producers have already undertaken on 27 July to increase the selling price of their products might not lead to a sustainable arrangement in the EU solar panels markets. Consequently the Commission may “include the anti-subsidy investigation into the undertaking at the definitive stage, should such action be warranted”. In any case the deadline for the imposition of definitive duties in both cases (anti-dumping and anti-subsidy) is 5 December 2013. Now the problem is what the Chinese reaction would be. Beijing may not hasten to react because there is plenty of time for negotiations until 5 December. If however Beijing accepts to re-negotiate the undertaking, it will be as if China is ready to increase its ‘contribution’. While commenting on the agreement of 27 July the Chinese Ministry of Commerce (MOFCOM) considered the whole affair as finally settled. According to the relevant press release issued on 5 August MOFCOM spokesman, Shen Danyang, “made comments to applause and welcome such agreement”. Now everything starts from the beginning.