Solar panel spat threatens trade war between China and Europe

ORIGINAL: The Guardian

Ian Traynor in Brussels

6 September 2012

Solar panels in Germany. A trade war between the EU and China looms.
Photograph: Sean Gallup/Getty Images

European commission investigates industry complaints that China is 'dumping' solar panels worth €20bn into the EU – threatening to damage relations between Germany and Beijing

The European commission upped the ante in a potential trade war with China on Thursday, announcing an investigation into allegedly unfair exports of solar panels worth more than €20bn (£15.85bn) a year.

Leading European solar panel manufacturers complained in July that China was demolishing competition by exporting the panels at a loss.

"In terms of import value affected, this is the most significant anti-dumping complaint the European commission has received so far," the commission said.

Last year China, which accounts for two thirds of global production, exported solar panels worth €21bn to the EU, some 80% of exported panels. The market is huge. In the span of a few years, China has become the world's biggest solar panels producer, while the EU is by far the biggest market for the Chinese products.

The probe threatens to be extremely contentious and highly sensitive politically. The German government, enjoying a trade and exports-based "special relationship" with China, is wary of incurring Beijing's wrath, although the complaint has been spearheaded by German firms.

On a recent visit to Beijing, the German chancellor, Angela Merkel, sought to defuse the escalating dispute, arguing that dialogue and not an EC investigation was the best way to deal with the issue.

Beijing's official English-language newspaper, China Daily, warned on Wednesday that Beijing would retaliate with trade curbs on the EU if Brussels went ahead with the investigation. Beijing has also been lobbying hard in Brussels behind the scenes against the probe.

"EU Pro Sun, an industry association, claimed in its complaint lodged on 25 July 2012 that solar panels and their key components imported from China enter the European market at prices below market value," the commission said. "The commission is legally obliged to open an anti-dumping investigation if it receives a valid complaint from a Union industry which provides evidence that exporting producers from one or more countries are dumping a particular product into the EU and causing injury to the Union industry."

The US authorities have already slapped tariffs on Chinese solar panel exports.

The complaint lodged with Brussels came from a consortium of some 20 European producers responsible for a quarter of EU manufacture of panels.

The commission said it would deliver a provisional verdict on the dispute by June next year and could then impose temporary tariffs on the Chinese. EU governments would then need to decide how to proceed by the end of next year.

China's commerce ministry website responded promptly to the commission move, stating:

"Restricting China's solar panel products will not only hurt the interests of both Chinese and European industry, it will also wreck the healthy development of the global solar and clean energy sector." The statement voiced "deep regret" at Brussels' action and said the EU should "seriously consider China's position and proposals, and resolve friction over solar panel trade through consultations and cooperation."