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July 04, 2013 at 09:05 PM
After the recent flap over the European Union’s decision to impose a tariff on solar panels dumped in the region from China, as well as the perhaps surprising news that China’s Suntech went into bankruptcy, one might think that Chinese cutbacks in production and export of solar panels might follow. However, that reading of the situation is likely wrong, since solar, along with wind, looms large in China’s energy plans, both domestically and abroad.
China has grown its presence in the EU solar panel market at a remarkable pace, considering that just a few years ago it was at nearly zero. Now its market share is over 80%, according to the European Commission, and its current rate of production is estimated by the EC to be at 1.5 times global demand.
With cutbacks everywhere affecting the solar panel industry globally, it added insult to injury when the EU said it had proof that China was dumping—selling its solar panels across the region at below-production costs. So in May, EU Trade Commissioner Karel De Gucht announced that he would penalize China, adding a punitive tariff in June to solar panels to compel China to halt the practice. The U.S. had already imposed trade sanctions on China’s solar panels in 2012, though the U.S. measures do not place a tariff on the wafers that are used to make solar cells. The EU sanctions do.
But instead the Chinese, who have sold about 21 billion euros ($27 billion) of China-manufactured solar panels in the EU, began pressuring EU member states to oppose the move. Among the 18 countries expressing their displeasure at the notion were Germany and England, fearing repercussions against their own entry into the telecommunications and financial services markets in China. The Netherlands and Sweden have also expressed their concern about Chinese retaliation against their own business interests there. However, France and Italy are firmly in support of the move, saying that the Chinese government has illegally supported dumping in the EU, costing thousands of European jobs in the process.
They may be right.
The tariff went into effect in early June, at a surprisingly low rate of only 11.8%. China has two months at that rate to correct the situation; if it fails to rein in dumping, the tariff will increase to a range of 37.2% to 67.9% on Aug. 6. Should China still fail to halt the practice, in December the higher rate range will become effective for five years.
In addition to China leaning on EU member states in an attempt to circumvent the tariff, its diplomats in Brussels issued a statement at the end of May warning that if trade sanctions went into effect, “the Chinese government would not sit on the sidelines, but would take necessary steps to defend its national interest.”
