The impact

The 7-gw quota reminds people of the embarrassing situation that China faced before its entry to the World Trade Organization (WTO). A decade ago, many developed countries imposed export quotas on Chinese-made products, which greatly hindered the expansion of several of China's industries.

Take the textile industry for example. The WTO membership makes it possible for China's textile industry to shake off quota restrictions and unleash its huge potential. Yet, before entering the WTO, according to a treaty approved by the General Agreement on Tariffs and Trade in 1974, developed countries were allowed to place export quotas on Chinese-made textile products. At that time, to gain access to foreign markets, some enterprises even paid more in purchasing quotas from larger textile enterprises than manufacturing. In some sense, China didn't win a complete victory in the solar trade war with the EU.

With the imposition of the 7-gw quota, China's solar industry would undergo a major reshuffle. On the one hand, the price undertaking prescribes that imported Chinese-made solar products that exceed the quota or are sold below the floor price will still be levied a 47.6-percent anti-dumping tariff. On the other hand, of the 200 solar manufacturers, only 95 that participate in the price undertaking arrangements will be exempted from the punitive tax, leaving more than 100 other enterprises to continue facing the dilemma.

Apparently, in the quota competition among domestic manufacturers, small enterprises will be squeezed out of the arena.

"Higher cost and backward manufacturing equipment put small enterprises at a disadvantage, and many of them may be phased out," Wang Xiaokun, an energy analyst from Sublime China Information, told Beijing Business Today.

Zhai Xiaohua, President of Canadian Solar Inc., believed that the price undertaking would give China's solar industry a chance to restructure and upgrade.

China's solar trade has experienced explosive growth. Swaths of small solar producers have cropped up in recent years. In foreign markets, Chinese solar producers are trapped in dog-eat-dog price wars, which directly led to frequent anti-dumping and countervailing probes by foreign countries.

"The entire solar industry will enter a period of integration and upgrading," said Wang. "It will help achieve the goal of large-scale production and manufacturing high value-added products."

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Solar Dispute Timeline

September 6, 2012: The European Commission announced an anti-dumping probe into photovoltaic products imported from China.

September 25, 2012: EU ProSun, a joint initiative of EU solar businesses, filed a second complaint to the European Commission, accusing Chinese photovoltaic manufacturers of receiving illegal subsidies from the Chinese Government and requiring a punitive import tariff on Chinese photovoltaic products.

November 8, 2012: The EU officially began an anti-subsidy investigation into Chinese-made solar products.

March 6, 2013: The EU began to register photovoltaic products imported from China.

May 22, 2013: The CCCME announced that it would submit a negotiation plan to the European Commission, which immediately rebuffed it. Then, the first round of talks on price undertaking collapsed.

May 24, 2013: A total of 17 EU members opposed the plan to impose anti-dumping and countervailing duties on solar imports from China.

June 4, 2013: The European Commission declared the levying of a provisional anti-dumping duty of 11.8 percent on imports of solar panels, cells and wafers from China, from June 6 to August 6, when the duty would be raised to 47.6 percent if a compromise was not reached between the two parties.

July 27, 2013: The China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) published a joint statement with other Chinese industry players announcing an agreement over China's solar panel exports to the EU.

(Compiled by Beijing Review)