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Chinese solar panels win – everyone else loses

Jonathan Lindsell, 29 July 2013

Over the weekend, EU Trade Commissioner Karel De Gucht capitulated in the trade war with China over the pricing of solar panels.

The ‘war’ began when European solar panel manufacturers (mostly Germans) complained to De Gucht  that the Chinese were ‘dumping’ their wares on the European market at prices below their actual worth, propped up artificially by Chinese state-owned banks.  On 6th June De Gucht began levying a ‘punitive tariff’ against Chinese solar panels, initially at 11.8% with the threat to bump this up to a fearsome 47.6% in August if agreement was not forthcoming. China rather divisively threatened to respond by increase the levy on wine imports, which terrified France, Italy and Spain far more than Germany.

solar panels small

These member states then pressured the Commission to make a hasty retreat.  After ‘weeks of intensive talks’ De Gucht has wrung a minor concession from China, an agreement to a ‘minimum price floor’. This minimum is, however, €0.56 per watt, or 25% lower than the prices were when German firms started lobbying for action! Understandably, then, the ‘EU ProSun’ manufacturing group dominated by the German company SolarWorld, is going to sue the European Commission to void the deal.

De Gucht’s solution has managed the unenviable feat of annoying everyone at once. Obviously both German and Chinese manufacturers are unhappy with the compromise. The German government never wanted the Commission to take action in the first place, afraid that a trade war would affect more important industries such as automobiles or industrial chemicals – both with a state stake. The Obama administration, meanwhile, is annoyed that the protectionism did not go far enough. The US solar industry has been devastated by the Chinese state-aided boom since 2007, and America has been boycotting Chinese goods ever since. Given the importance of cordial relations during the negotiations for an EU-US trade deal, the Americans must find this lack of faith disturbing.

Several American panel manufacturers have already gone bust, and the US maintains a 30% tariff against China. This latest development poses yet another hurdle to the ‘Transatlantic Trade and Investment Partnership’ (TTIP), which I’ve long suspected is doomed to compromise and irrelevance.  As Keith Bradsher of the New York Times writes, “The European Commission is supposed to negotiate on behalf of all member countries.” That German whims one way then the other can sway a whole continent’s policy so easily, and so ruinously, highlights the EU’s instability and the ‘every country for themselves’ reality that lurks below the EU’s placid surface.

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