The EU Takes Action in the Solar Power Trade War with China

on Nov 8, 2012
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The EU stepped up the ongoing solar power trade war with China, with the European Commission opening an enquiry into alleged state subsidies for Chinese solar power manufacturers already accused of unfair prices. And while the EU is yet to investigate whether Chinese exporters of solar panels receive trade-distorting government aid, Reuters reported that the US gave final approval to duties on billions of dollars of solar power products from China for the next five years.

**EU Steps Up Tariff Threat on Chinese Solar Panels**
As announced in the Official Journal of the EU, on November 8, the Commission initiated an anti-subsidy proceeding concerning imports of crystalline silicone photovoltaic modules and key components originating in China. The investigation follows a complaint by the EU ProSun group of European solar panel producers led by Germany’s SolarWorld (ETR:SWV, FRA:SWV) and aims to determine whether solar panels from China “are being subsidised and are thereby causing material injury to the Union industry.”

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Reuters quotes EU ProSun as saying that Chinese solar panel producers have benefitted from very low interest rates due to government policy, and if loans cannot be paid off, they may be written off, extended indefinitely, or paid off by government-controlled entities. The European solar industry group has estimated that as a result of export subsidies, Chinese producers have reached a market share of more than 80 percent in Europe.

While anti-dumping investigations are not uncommon, those concerning subsidies are more sensitive, given that they target a country, rather than just its specific industry. The Commission has nine months to decide whether to impose provisional anti-subsidy duties, whereas the EU Member States have 13 months to implement definitive duties for up to five years.

**China’s WTO Complaint**
!m[The European Commission Launches Investigation Into Alleged Chinese State Subsidies](/uploads/story/747/thumbs/pic1_inline.png)The Commission’s decision to launch an investigation into Chinese subsidies comes after on November 5, China lodged a complaint with the World Trade Organisation (WTO) claiming that Italy and Greece had illegally promoted domestic panel producers. Reuters reports that China warned it could put tariffs on EU exports of the raw material polysilicon. “The Chinese government has the right and the responsibility to fight for a fair international trade environment for China’s solar industry,” a spokesman for the Chinese Ministry of Commerce said in a statement, as quoted by Reuters.

Bloomberg reports that Europe accounts for around three-quarters of the global photovoltaic market, whereas China produces some 65 percent of solar panels worldwide, with the EU being China’s main export market.
**The US One Step Ahead**
And while the outcome of the Commission’s investigation is still to be determined, on November 7, the US International Trade Commission voted in favour of antidumping and countervailing duties on solar power products from China. In a statement, the US Commission said that it determined that the US industry was “materially injured by reason of imports of crystalline silicon photovoltaic cells and modules from China”, with the products “subsidised and sold in the United States at less than fair value.”
The US decision, however, has spurred fears about potential Chinese retaliation, with Reuters quoting Tom Gutierrez, president of GT Advanced Technologies (NASDAQ:GTAT), as saying that he feared getting caught in the cross-fire in the case. “If you punch someone in the nose, (the US government) ought to have a backup plan for when they retaliate,” Mr Gutierrez commented. “I’m preparing for the fallout.”

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