China, EU on Brink of Solar Trade War

solar panel chinese

Image Source: VOA News

China and the EU are on the verge of imposing punitive tariffs against one another’s solar power products as China’s leadership transition hampers negotiations over complaints by European manufacturers that Chinese companies have engaged in unfair trade practices.

The EU Commission launched an investigation into Chinese solar panels last September following complaints by European companies, led by Germany’s Solar World, that their Chinese rivals were selling panels below cost with the aid of state largesse in a bid to put the European companies out of business and usurp their market position.

The solar industry is the biggest import sector ever targeted by an EU Commission investigation, with China selling more than $25 billion in solar panels to the EU in 2011.

China has responded to the allegations by accusing Europe of illegally favouring its own solar panel manufacturers and fielding the possibility of imposing duties on EU exports of polysilicon.

While EU leaders are reluctant to impose duties on Chinese solar products due to the critical role that China’s export market plays in helping the ailing European economy to recover, the decennial transition in China’s political leadership has severely hampered negotiation efforts.

Chen Deming

Chen Deming. Image Source: Business Week

EU officials and diplomats have complained of a leadership vacuum within China’s Ministry of Commerce and an inability to deal with any key figures aside from commerce minister Chen Deming, who is expected to vacate the position.

Reuters cited an unnamed EU official as saying that “there is no clarity on what the new leadership thinks about trade.”

“They are stonewalling and the window of opportunity for a solution on solar panels is closing,” the source was quoted as saying.

While core positions for China’s succeeding administration were confirmed at the 2012 National Party Congress, the full cohort of senior leaders have yet to be publicly confirmed and will in any case not formally assume office until the National People’s Congress in March.

Time is of the essence in successfully resolving the solar trade dispute, however, as diplomats from the EU’s 27 countries are expected to make their recommendations on the case to the European Commission by mid-April while Beijing could issue a decision on polysilicon duties as soon as the end of February.

The tight time frame means that Beijing’s new trade minister will have little more than a month to become familiar with the nuances and details of the case before attempting to reach a settlement.

By Marc Howe
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