Tensions Eased

　　AChina-EU settlement ensures Chinesesolar panel makers won’t be shut outof a massive market

　　As the saying goes， every cloud has asilver lining. Just as it was widely believedthat Chinese photovoltaic exports to theEuropean Union (EU) would continue to beslapped with unreasonable duties， a turnaroundcame.

　　On July 27， five solar panel groups， includingthe China Chamber of Commerce forImport and Export of Machinery and ElectronicProducts (CCCME)， announced that an agreementhad been reached to allow Chinese solarpanel imports access to a majority of the EUmarket at a minimum set price.

　　The deal， reached between the CCCME andthe European Commission， came after weeks ofintensive talks following a decision by the commissionto impose provisional anti-dumpingduties on Chinese for two months beginning inearly June.

　　The agreement pegged the floor pricefor Chinese solar imports at 0.56 euro ($0.74)per watt and imposed an export quota of 7gigawatts (gw) on Chinese manufacturers.

　　The compromise came just in time. If the twoparties failed to reach a consensus on a priceundertaking before August 6， all Chinese solarpanel exports to the EU would be levied with ananti-dumping duty as high as 47.6 percent.

　　“To comply with the new agreement，Chinese manufacturers have to raise prices by 10 percent. Compared with the 47.6-percentpunitive duty， the price increase seemsless desperate，” said Zhao Yuwen， Directorof the Photovoltaic Committee of the ChinaRenewable Energy Society.

　　“Under the terms of the deal， about 60percent of the market share in the EU could beguaranteed for Chinese solar panel exporters，”said Chen Huiqing， Deputy Director of the LegalDepartment of the CCCME.

　　Theprice settlement was welcomed by theMinistry of Commerce (MOFCOM)， which saidthe decision would help ease China-EU bilateraltrade frictions. Shen Danyang， MOFCOMspokesman， believed that settling trade disputesthrough negotiations would contributeto an open， cooperative， stable and sustainablerelationship between two of the world’s largesteconomies.

　　On the other side， Karel De Gucht， the EUTrade Commissioner， also expressed satisfactionwith the price settlement， saying the dealwould lead to a new market balance at sustainableprices.

　　Avoiding a lose-lose result

　　China is the EU’s second largest trading partnerafter the United States. In 2012， China exportedgoods worth 290 billion euros ($385 billion) tothe EU， while goods totaling 144 billion euros($191 billion) flowed from the EU to China.

　　When aballot was held in May to allow EUmembers to vote on whether to tax Chinesesolar panel products， the Alliance for AffordableSolar Energy (AFASE)， which represents morethan 1，000 European photovoltaic manufacturers，protested.

　　According to the European PhotovoltaicIndustry Association， around 70 percent ofthe photovoltaic supply chain’s value in the EU market is created in Europe. It’s worth 40 billioneuros ($53 billion) and provides 265，000 jobs forEU countries. “In contrast， the enterprises in favorof a heavy anti-dumping tariff against Chinaonly create no more than 8，000 jobs，” said in anopen letter sent to the European Commissionby the AFASE.

　　A study by Prognos， a German researchconsultancy， shows， 115，600 jobs could be lostin the EU as a result of anti-dumping duties， withupward of 4.7 billion euros ($6.24 billion) in totallost revenue. In addition， a great many Chinesesolar panel producers， or even the entire photovoltaicindustry， would be pushed to the brink ofbankruptcy if the tariffs were imposed.

　　Taking advantage of a growing marketfor renewable energy， Chinese solar panelproduction quadrupled between 2009 and2011—more than the world’s entire demand.In 2011， Chinese photovoltaic exports tothe EU totaled $20.4 billion. With the panic triggeredby the EU anti-dumping investigationsweeping across the industry， the figure fell to$11.19 billion in 2012， down 45.1 percent.

　　The impact

　　The 7-gw quota reminds people of the embarrassingsituation that China faced before itsentry to the World Trade Organization (WTO).

　　A decade ago， many developed countriesimposed export quotas on Chinese-made products，which greatly hindered the expansion ofseveral of China’s industries.

　　Take the textile industry for example. TheWTO membership makes it possible for China’stextile industry to shake off quota restrictionsand unleash its huge potential. Yet， before enteringthe WTO， according to a treaty approvedby the General Agreement on Tariffs and Tradein 1974， developed countries were allowed toplace export quotas on Chinese-made textileproducts. At that time， to gain access to foreignmarkets， some enterprises even paid more inpurchasing quotas from larger textile enterprisesthan manufacturing. In some sense， Chinadidn’t win a complete victory in the solar tradewar with the EU.

　　With theimposition of the 7-gw quota，China’s solar industry would undergo a majorreshuffle. On the one hand， the price undertakingprescribes that imported Chinese-madesolar products that exceed the quota or aresold below the floor price will still be levied a47.6-percent anti-dumping tariff. On the otherhand， of the 200 solar manufacturers， only 95that participate in the price undertaking arrangementswill be exempted from the punitivetax， leaving more than 100 other enterprises tocontinue facing the dilemma.

　　Apparently，in the quota competitionamong domestic manufacturers， small enterpriseswill be squeezed out of the arena.

　　“Higher cost and backward manufacturingequipment put small enterprises at a disadvantage，and many of them may be phased out，”Wang Xiaokun， an energy analyst from SublimeChina Information， told Beijing Business Today.

　　Zhai Xiaohua， President of Canadian SolarInc.， believed that the price undertaking wouldgive China’s solar industry a chance to restructureand upgrade.

　　China’s solar trade has experienced explosivegrowth. Swaths of small solar producershave cropped up in recent years. In foreignmarkets， Chinese solar producers are trapped indog-eat-dog price wars， which directly led to frequentanti-dumping and countervailing probesby foreign countries.

　　“The entire solar industry will enter aperiod of integration and upgrading，” saidWang. “It will help achieve the goal of largescaleproduction and manufacturing highvalue-added products.”

　　By Deng Yaqing