Clouded judgement?

“Go dump these in Europe”

“I t takes two for a war, and I can declare here that the EU is not available for a trade war with China,” insisted Markus Ederer, the European Union’s ambassador to China, earlier this year.

The problem from the Chinese perspective is that the Europeans look like they are spoiling for a fight, with the European Commission investigating at least 21 dumping or subsidy complaints against Chinese firms at the beginning of the year, even as Ederer was calling for calm.

One of the actions also moved much closer to confrontation last week, following the announcement that the Commission will introduce tariffs to punish Chinese solar manufacturers for what it believes to be using state subsidies to sell panels in Europe below their cost price. It found in favour of a case brought by EU ProSun, an industry association of solar producers from 20 EU countries.

A pause will ensue until the end of the year before tariffs are implemented on Chinese exporters, who grabbed almost 80% of the European market by selling $27 billion worth of panels in 2011, up from almost nothing a few years before.

The delay may leave time for a settlement with the Chinese, who responded to news of the ruling in a fairly measured tone. “We don’t want to see a trade war between the two sides and we hope the EU can cautiously make the ruling decision on China’s solar panel products,” a Ministry of Commerce spokesman told reporters. Previously the Ministry has indicated that as many as 400,000 Chinese workers could be impacted by Europe’s action.

Despite Ambassador Ederer’s assertion that ‘it takes two’ for conflict, the war of words on solar tariffs is actually being fought on a wider front, with plenty of disagreement among the Europeans themselves. For instance, The Alliance for Affordable Solar Energy, a lobby group, argues that punitive action will cause “irreversible damage to the entire European photovoltaic value chain”.

WiC mentioned a similar rift in the United States last year between firms that make solar panels and those that install them (see WiC154) and divisions within Europe seem to follow similar lines. Opponents of the action insist that higher prices for Chinese-made panels will make solar power more expensive, resulting in a loss of revenues and jobs at the firms who install, maintain and deliver solar power. There is also the fear that Chinese panel producers won’t need to buy the same supply of modules, cells and wafers from Europe, meaning more jobs will be lost.

But proponents of the action say their opponents are scaremongering. “This is ridiculous and like saying that the Tour de France depends mostly on Lance Armstrong and doping,” Milan Nitzschke, president of EU ProSun, told PV-Tech, an industry magazine. He also says that the same arguments were made before action was taken in the United States last year and that the industry there hasn’t been hit as hard as suggested. “The number of solar installations has increased substantially and consumer prices have remained stable or even decreased, even though Chinese imports have drastically declined,” he reassured. “It is a win-win situation.”

But John Cochrane, a professor at the University of Chicago, admits to feeling a little confused about the EU’s anti-dumping plan. Writing on his blog, Cochrane points out that some European governments have subsidised the installation of solar panels as a means to fight carbon emissions.

So rather than fire the opening salvo in a trade dispute, he suggests the EU adopt a friendlier gambit. “If we want to subsidise solar panel production for environmental reasons, and if China decides to tax its citizens to provide the subsidies rather than us tax our citizens, the appropriate response is flowers, chocolates and a nice thank-you card,” Cochrane advises.

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