Chinese Solar Exports Pressure EU Producers

Chinese Solar Exports Pressure EU Producers

Over the past five years, solar panel production in China has more than quadrupled thanks to the country’s enormous state subsidies and various support schemes targeting national solar technology firms. This huge manufacturing boost has not only raised China to the position of the world’s largest solar panel producer, but it has also created enough productive capacity for China to export most of its panels to lucrative international markets, such as the European Union and North America.

Equivalent sectors in most other world regions have experienced much slower or even stagnant growth, and, consequently, China’s present supply of solar products considerably exceeds global demand. This has raised concerns within the EU over Chinese photovoltaic products that China would have to sell some of its oversupply of exports at prices lower than the actual costs of production — a trade practice commonly known as ‘dumping.’

Addressing these speculations, EU Trade Commissioner Karel De Gucht recently confirmed that Chinese solar panels are  currently sold to Europe at nearly 90 percent below their production costs, forcing many EU solar manufacturers out of business and thereby leaving thousands of Europeans jobless.

Given these unfavourable trends in the European photovoltaic market, it was hardly surprising when the European Union and China made headlines last week with an anti-dumping agreement on the regulation of Chinese solar panel imports. Commissioner De Gucht and Chinese Commerce Minister Gao Hucheng sealed the settlement last Saturday, 27 July, and reportedly specified a minimum EU selling price for Chinese solar panels of 56 euro cents per watt of generated power, thus bringing the prices of Chinese panels slightly closer to standard European market levels.

The new accord has been hailed as a momentous step forward in Sino-European trade cooperation by political elites on both sides, being described as an “amicable solution in the EU-China solar panels case” by Commissioner De Gucht and as a “positive and highly constructive outcome” by Chinese Commerce Ministry Spokesperson Shen Danyang.

The agreement is also symbolic insofar as it marks a relative easing of tensions between China and the EU, after six weeks of intense bilateral commercial negotiations and mutual allegations of anti-competitive trade practices. Relations between the two trading partners have been particularly strained over the past few weeks in view of Brussels’ decision last month to impose a 11.8 percent emergency anti-dumping tariff on EU imports of Chinese solar panels. Even more controversially, it was announced that this EU tariff would further increase to 47.6 percent by early August, prompting China to threaten to levy tariffs on European wine imports and some EU chemical products.

Clearly, the signing of the agreement between the EU and China represents an important compromise that was intended to head off the escalation of a full-blown trade war between the two parties, and still provide some level of protection for EU solar technology producers from strong competition by their Chinese counterparts. In line with these goals, the agreement envisions the abandonment of the 11.8 percent and 47.6 percent tariffs in favour of a somewhat less drastic arrangement: the minimum price of 56 euro cents per watt for Chinese solar panel imports. However, this minimum-price scheme is also conditional, as it is voluntary and  applies only to Chinese imports that generate up to seven gigawatts of energy a year. Therefore, any imports, which do not take part in the scheme, or which exceed the seven-gigawatt threshold would still be subject to the earlier EU tariff regulations.

Although the conditionalities attached to the new Sino-European agreement may suggest that the EU accords at least as much importance to protecting its emerging solar industry as to developing EU-China trade ties, it is doubtful whether this agreement will actually help reduce European solar producers’ anxiety over increasing  competitive pressures from overseas. The minimum price of 56 cents per watt is admittedly a considerable improvement compared to the average of 38 cents a watt paid for Chinese solar panel imports in the EU before the bilateral agreement.

However, many European producers have complained that 56 cents per watt is still an extremely underpriced value relative to the costs associated with solar technology production and, therefore, even this minimum price constitutes dumping. Commenting on the inefficacy of the minimum price arrangement for Chinese solar panel imports, the president of the European solar panel manufacturer association EU ProSun—Milan Nitzschke—expressed serious concerns that the arrangement actually “endangers the very existence of the European solar industry, which has already lost 15,000 jobs due to Chinese dumping, and now is at risk of losing most if not all of the remaining producers in Europe.”

Furthermore, Nitzschke criticised the accord between the EU and China for explicitly allowing Chinese solar panel producers to supply nearly half of the EU’s annual photovoltaic consumption (seven out of fifteen gigawatts) without being subject to tariffs, and highlighted the fact that the agreement  covers only 90 of about 140 current Chinese exporters of solar products present in the EU market. Based on these perceived inconsistencies with European competition and trade law and policy norms, Nitzschke stated that EU ProSun would appeal to the European Court of Justice for a complete annulment of the agreement.

While it remains to be seen if EU ProSun’s criticisms will have any bearing on the EU’s official policy position, it is clear that the anti-dumping stance taken by the EU, although timely and relevant, needs to be complemented with further concrete and far more substantive measures in order to boost European solar panel producers’ competitiveness and ensure the viability of the European photovoltaic industry in the near future.

Categories: Economics, Europe

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