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Merkel Vows to Avert China Trade Row as Li Rejects EU Duties

German Chancellor Angela Merkel and Chinese Premier Li Keqiang
German Chancellor Angela Merkel and Chinese Premier Li Keqiang walk past a military honor guard at the chancellery in Berlin on May 26, 2013. Photographer: Odd Andersen/AFP via Getty Images

German Chancellor Angela Merkel said that she’ll work to resolve a European Union trade dispute with China over complaints that the Chinese solar industry is flooding the global market with cheap products.

Merkel, speaking at a joint press conference with Chinese Premier Li Keqiang in Berlin yesterday, said that she’ll strive to ensure no permanent tariffs are imposed by the EU on China over its solar products and will work over the next six months for a solution to the dispute. Li said that he “decisively” rejected the imposition of EU duties.

Germany will work hard so that “issues we currently have, for example in the areas of solar energy and telecommunications, will be addressed through as many talks as possible and won’t lead to conflict, leading to mutual tariffs,” Merkel told reporters. “We don’t believe that this will help us.”

Li, who chose Germany as the only European Union country on the agenda for his first overseas trip as premier, said that he wanted China-Germany relations to serve as a model for his country’s ties with the wider EU. He said that he “values” Merkel’s position on solar tariffs.

“We don’t agree with this decision and we decisively reject this decision,” Li said through a translator, when asked by a reporter about the prospect of EU import duties. “This decision will not only harm jobs in China as well as development in the affected industries, but it will also affect development and endanger industry in Europe.”

‘Definitive’ Duties

The European Commission, the EU’s regulatory arm, expects to introduce levies on solar products by June 6 to punish Chinese manufacturers for selling in the 27-nation EU below cost, a practice known as dumping. The duties will be the preliminary outcome of an inquiry that is due to end in early December, by which time EU governments must decide whether to impose “definitive” anti-dumping duties for five years.

The Alliance for Affordable Solar Energy, a Brussels-based lobby group, had urged Merkel to defuse the looming trade conflict and “actively push” for a mutual solution as tariffs would only hurt jobs and undermine solar energy growth. The Obama administration has also engaged in preliminary talks with the EU and China to settle the solar dispute, according to people familiar with the discussions.

The EU is poised to penalize imports of Chinese solar products after Solarworld AG, Germany’s biggest panel maker, lodged an anti-dumping complaint with the commission. Import tariffs would hurt manufacturers such as China’s Trina Solar Ltd. and raise costs to build power plants in Europe, the world’s largest market for solar products and one largely supplied by Chinese manufacturers.

Chinese ’Monopoly’

Tariffs are urgently necessary to prevent a Chinese solar “monopoly” as dumping of “up to nearly 90 percent” is taking place in Europe, EU ProSun, the industry group behind the complaint, said today in an e-mailed statement.

“We call on the EU to impose tariffs urgently that reflect the illegal practices of subsidized Chinese producers in the European market,” said Milan Nitzschke, the head of EU ProSun.

Merkel and Li, who is scheduled to deliver a speech to a German-Chinese business forum in Berlin today, oversaw the signing of 17 bilateral agreements covering cooperation between companies including Volkswagen AG and SAIC Motor Corp., Weichai Power Co. and Kion Group GmbH.

“By intensifying our cooperation with Germany, we also want to deepen our ties and cooperation with the EU,” Li said. “In no way do I mean that Germany can substitute for the EU. I mean that Germany is a very important country.”

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