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Cover Story Series> Business
UPDATED: June 24, 2013 NO. 26 JUNE 27, 2013
A Growing Rift
Negotiations are key to avoiding a looming trade war over EU tariffs on Chinese solar products
By Zhou Xiaoyan

PLAYING TOUGH: Karel De Gucht (left), the EU's Trade Commissioner, leans toward the host of a press conference on June 4, during which he announced an anti-dumping investigation on Chinese solar products (YAN TING)

Despite opposition from 18 EU member states, hundreds of EU solar companies and 15 European photovoltaic (PV) associations, Karel De Gucht, EU's Trade Commissioner, announced on June 4 that the EU would impose provisional anti-dumping tariffs on imports of solar panels, cells and wafers from China.

This is the preliminary ruling of an investigation launched by the European Commission in September 2012. According to the ruling, starting from June 6, EU imports of Chinese solar products would be subject to an interim duty of 11.8 percent until August 6. If China and the EU fail to reach a settlement by then, the duty will be raised to an average of 47.6 percent until December 6, 2013. A final ruling schedule on that day would decide whether to turn the provisional duties into definitive measures in the next five years.

This is not the first time that China's solar makers have encountered trade barriers.

In 2012, the United States imposed anti-dumping tariffs of up to 249.96 percent and anti-subsidy tariffs of up to 15.97 percent on Chinese solar panels. The EU's tariffs, however, are more devastating to China's already vulnerable solar industry as the EU, the world's largest solar market, is China's top destination for solar exports.

European imports of China-made solar products totaled 21 billion euros ($27.89 billion) in 2011, accounting for 70 percent of China's total solar product exports and 7 percent of the total trade volume between China and EU, according to an EU estimation.

Due to the trade dispute, Chinese exports of PV products to EU totaled $11.19 billion in 2012, down 45.1 percent year on year. Despite the plunge, the EU is still China's largest solar export destination, accounting for 46.1 percent of total exports in 2012, according to a report from the China Market Report Center under Shenzhen Zero Power Intelligence.

A negotiation troop formed by staff from China's Ministry of Commerce (MOFCOM) and China Chamber of Commerce for Import and Export of Machinery and Electronic Products was sent to the EU by the Chinese Government days after the preliminary ruling. But no results had been released to the public by the time this article went to press. Also, the EU's Trade Commissioner Karel De Gucht visited Beijing on June 21 to meet Chinese Commerce Minister Gao Hucheng to discuss the issue.

As the two sides get ready for negotiations on the matter, it has become evident that a trade war is to no one's benefit. Amid fresh trade tensions, China's PV sector is going through a business reshuffle that features a stronger presence in emerging markets and rising domestic demand.

China on the go

China has opposed the EU's duties and called for solving the dispute through dialogue and consultation.

"China is strongly opposed to the anti-dumping tariffs imposed by the European Commission," said Shen Danyang, a spokesman for the MOFCOM, during a press conference immediately following the European Commission's announcement.

"So far, we are not satisfied with the result. But it's already a hard-earned one after China tried its best," said Shen, referring to the fact that the tariff rate was divided into two stages and China is given two months to further negotiate with the EU.

The 11.8-percent interim tariff lasting from June 6 to August 6 is much less than previous expectations, which is largely attributed to the Chinese Government's active negotiation with the EU, especially by Chinese Premier Li Keqiang, say analysts.

During his official visit to Switzerland in May, Li expressed China's stance on solving trade frictions through dialogue and negotiation. Later that month, Li went to Germany and won over German Chancellor Angela Merkel's support on the matter. On May 27, Merkel called for an end to the trade row between Europe and China over solar panels and wireless equipment, citing the need for more trade between the two sides.

On June 3, Li called Jose Manuel Barroso, President of the European Commission, expressing his concerns over the dispute, adding that if the EU insisted on punitive measures, China is bound to counterattack.

"If this case is not properly handled, it will not only harm the interests of Chinese and European companies, but also bring about a possible trade war. There is no winner in a trade war. I hope that both sides can see the bigger picture and try to solve the trade dispute through dialogue and negotiation," Li told Barroso.

On June 7, Premier Li visited some Chinese PV makers in north China's Hebei Province, where he encouraged them to remain hopeful.

"We hope the EU can show more sincerity and flexibility," said MOFCOM spokesman Shen. "In the next two months, the EU should sit down with Chinese solar makers and find an acceptable, reasonable and win-win solution that both sides can accept."

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