EU Pact on Chinese Solar Panels Marks Beijing-to-Berlin Win

Planned European Union curbs on Chinese solar panels would last less than half as long as normal trade protection, marking a victory not just for China but also for Germany, the U.K. and other free-market proponents in the EU’s biggest dispute of its kind.

European Trade Commissioner Karel De Gucht said yesterday the agreement he sealed with China over the weekend setting a minimum price and a volume limit on EU imports of Chinese solar panels will expire at the end of 2015. Chinese manufacturers that take part would be spared EU tariffs meant to counter below-cost sales, a practice known as dumping.

Along with China, EU governments including those of German Chancellor Angela Merkel and U.K. Prime Minister David Cameron have warned against European levies on imports of the renewable-energy technology. The EU’s 28 nations must decide by Dec. 5 whether to turn the negotiated deal into a package of “definitive” anti-dumping measures to help a withering domestic industry. These typically last for five years rather than the shorter period foreseen in De Gucht’s plan.

“We allow a certain intervention in the market hoping, and we are trustful, that this will lead to a stabilization of the market,” De Gucht told reporters yesterday in Brussels. “If the European solar industry wants to continue selling solar panels, they will have to be competitive with the rest of the world. That’s a free market.”

Political Agenda

The EU effort to restrain Chinese competition against European producers such as Solarworld AG (SWV) has jumped to the top of the political agenda in Europe’s capitals and Beijing as Chinese manufacturers and European importers warn about price increases. The case covers EU imports of crystalline silicon photovoltaic modules or panels, and cells and wafers used in them -- shipments valued at 21 billion euros ($28 billion) in 2011.

In retaliation, the Chinese government is threatening to impose punitive duties on imports into China of polysilicon -- a material used in solar panels -- and wine from Europe.

Those two cases came up during the negotiations on the accord over Chinese solar panels, according to De Gucht. He said China agreed to allow “a window for discussions” with European polysilicon and wine producers in an effort to avoid possible punitive duties against them due as soon as February next year.

“The Chinese government has promised to facilitate such discussions,” De Gucht said. “That’s exactly what has been agreed.”

Possible Dumping

He said another controversial trade issue -- Chinese shipments of mobile-telecommunications equipment to Europe -- didn’t feature in the solar-panel talks. In May, the European Commission said it was prepared to probe possible Chinese subsidies to telecom-network makers such as Huawei Technologies Co. and the possible dumping of the equipment in the EU -- steps that could result in punitive EU duties.

De Gucht signaled the EU-China agreement on solar panels should be a model for the telecom case, which affects such European companies as Ericsson AB.

“The solution we have found is targeted and innovative,” De Gucht said. “We will need such a constructive approach also for other cases affecting trade between the EU and China. And I sincerely hope that the solution we found in the solar-panels case will set the tone for these discussions.”

Lower Rate

In early June, the commission announced provisional anti-dumping duties as high as 67.9 percent on Chinese solar panels as part of a probe begun in September. The commission, the EU’s executive arm, decided to apply an initial lower rate of 11.8 percent for two months to encourage the government in Beijing to negotiate a solution.

As of Aug. 6, unless the accord goes ahead, the provisional levies will range from 37.3 percent to 67.9 percent, depending on the Chinese company. The import taxes target more than 100 Chinese companies including Yingli Green Energy Holding Co., Wuxi Suntech Power Co. and Changzhou Trina Solar Energy Co.

De Gucht said the commission is due to decide on Aug. 2 on the negotiated deal. He didn’t disclose the agreed minimum price and volume limit.

The accord would fix a minimum price of 56 euro cents a watt for annual imports from China of as much as 7 gigawatts, a trade official in Europe said on July 27 when the commission announced that an agreement had been reached. The pact would cover around 90 Chinese exporters that have about 60 percent of the EU solar-panel market, according to the official, who spoke on the condition of anonymity.

Downward Pressure

De Gucht said the agreement covers Chinese exporters that account for 70 percent of EU imports of solar panels. He also said the Chinese industry had sold the goods in Europe for as low as 40 euro cents a watt.

“By setting a floor price, the downward pressure on prices should come to an end,” De Gucht said. He said the commission assumed the European solar-panel market, of which Chinese companies have an 80 percent share, would grow.

EU ProSun (EUESEMU), which represents around 40 European solar-panel producers including Solarworld of Germany, has called the accord unacceptable and vowed to file a lawsuit.

The group said on July 27 that the agreed minimum price matches that at which Chinese exporters are selling solar panels in the EU. Yesterday, EU ProSun said the bloc’s solar market is “expected” to be 10 gigawatts in 2013.

Negotiated Settlement

“In other words, 70 percent of the EU market will be given over to China’s planned economy delivering products at dumped prices,” Milan Nitzschke, president of EU ProSun, said in an e-mailed statement on July 29. “European industry expects further bankruptcies and job losses as a result of this agreement.”

In Europe, which accounts for about three-quarters of the global photovoltaic market, more than two dozen manufacturers have sought protection from creditors since 2010 and many have shifted production to lower-cost plants in Asia. Germany’s Q-Cells SE, which was acquired last year by South Korea’s Hanwha Group, has its largest factory in Malaysia.

De Gucht dismissed EU ProSun’s argument, saying “I think they have no case,” and said he had the impression a group representing European importers of solar panels was also dissatisfied with the negotiated settlement.

“When nobody really agrees, then in politics there is also a good chance that you are more or less in the right middle,” he said.

The EU is also threatening to impose a separate set of duties on Chinese solar panels to counter alleged subsidies. That’s the focus of a second investigation in which the deadline for introducing any provisional anti-subsidy duties is Aug. 8 and for imposing any definitive measures is early December.

De Gucht said the accord reached with China as part of the dumping investigation would be factored into the commission’s subsidy inquiry. He declined to say whether that would lead to provisional anti-subsidy duties on Chinese solar panels.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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