EU steps up pressure on China in solar panel battle

Crippling import duties are to be imposed on Chinese solar panels by the European Union, in a move that could trigger a trade war between two of the world’s largest economies.

European Union Trade Commissioner Karel De Gucht. Picture: Getty

Trade commissioner Karel de Gucht announced the 27-nation EU will impose a tariff of about 12 per cent on the import of panels, cells and wafers immediately, increasing it to an average of 47 per cent in August – unless a settlement is reached with China.

China is the world’s largest producer of solar panels and is accused by the EU of selling them below cost to corner the market. Exports to Europe totalled €21 billion (£18bn) in 2011.

Mr de Gucht yesterday said the price at which Chinese solar panels are sold in Europe should be 88 per cent higher, according to the commission’s calculations. Chinese solar panels’ market share in the EU has risen to 80 per cent from virtually zero over recent years, a rapid rise that countries such as France and Italy say could not have happened without illegal state subsidies.

The cheap Chinese products are flooding the market and threaten to bring down EU manufacturers, Mr de Gucht warned. “It has the potential to destroy an important industry in Europe if we don’t act today,” he said.

The commission, the EU’s executive arm, hopes to reach a settlement with Beijing and, therefore, has taken a phased approach that leaves two months for intense negotiations before the special duties reach the punitive level of 47 per cent.

“The ball is now in China’s court,” Mr de Gucht said. “This is a one-time offer to the Chinese side to negotiate.”

The trade row between the EU and China is the world’s biggest “anti-dumping” case by sales volume. “We are willing to reach a deal,” said one EU official close to the talks with China. “Our strategy is a phased-in approach, although the threat of punitive duties remains.”

The global solar panel market is suffering from overcapacity, which has has forced several European manufacturers out of business. Mr de Gucht added that to reach a settlement, Chinese manufacturers would have to agree to increase their prices and accept a lower market share quota. “I would like to see an agreement. If we get it right, it would be better for both sides.”

But several EU nations, including Germany, are against imposing special duties and have urged the commission to reach a settlement with China. Germany has the bloc’s biggest solar industry, but Berlin fears imposing special duties could provoke Chinese retaliation on imports of European goods which, in turn, would harm German exporters.

Berlin actually contributed to the problem through a scheme to get German consumers to buy solar panels to reduce fossil fuel consumption – Chinese producers went into overdrive to supply the artificially-stimulated demand.

China premier Li Keqiang warned last month that imposing punitive tariffs would hurt European consumers and might encourage trade protectionism, but he stopped short of threatening retaliation.

China’s annual solar panel production is greater than the entire global demand, according to European solar panel makers.