Europe’s solar dispute Case Study
In May 2013 the European Commission (EC) claimed that China dumps solar products into the European market at artificially low prices to gain market share, putting European manufacturers at a disadvantage. Dumping is illegal under international trade law. Chinese solar panel production quadrupled between 2009 and 2011 to more than the total world demand as it took advantage of a growing market for renewable energy due to concerns about climate change. China exports 21 billion Euros of solar panels to Europe each year. But the global financial crisis and euro-zone crisis have forced European governments to withdraw generous subsidies for solar energy. As Chinese imports of solar panels flooded the market, prices were further pushed down sending many European manufacturers into bankruptcy.
As trade talks stalled, the EC imposed tariffs of 11.8 per cent on Chinese solar imports but indicated that it preferred to impose minimum prices and other conditions on Chinese solar-equipment exports to Europe. The EC offered to set the minimum price close to the current international price of between 50 and 60 European cents per watt of solar-panel capacity. An earlier anti-dumping investigation established that a Chinese export price of 110 European cents was needed to eliminate the economic damage caused by Chinese sales on European producers. But officials were now prepared to accept a much lower minimum price due to drastically different market conditions since the initial investigation. The Commission was also proposing to give 60 per cent of the EU market to Chinese solar panel producers that sign on to the minimum-price settlement. This represents a reduction from the market share of 80 per cent that Chinese producers enjoyed. Despite the EC’s offer to lower the minimum price, after three weeks of negotiations China was not prepared to accept the EC’s minimum price with about five cents separating the European and Chinese offers. As negotiations continued, Germany’s SolarWorld and a coalition of 25 other companies lodged a new complaint of dumping by Chinese solar manufacturers.
Then a compromise was reached in August 2013. The EC and China agreed to a minimum price of 56 European cents per watt. Under the terms of the deal, China was allowed to meet about half of Europe’s solar panel demand based on 2012 sales levels. But the new deal did not satisfy some European solar manufacturers who said the agreed minimum import price was still dumping. They accused the EC of breaking EU law by failing to protect European industry. Following an investigation, the EC imposed anti-subsidy and anti-dumping tariffs on imports of Chinese solar panels in May 2014 but decided to remove the controls in August 2018, leading to concerns about a flood of cheap imports into Europe. A subsequent review by the EC in 2019 concluded that trade measures should be re-imposed and new anti-subsidy duties up to 17.1% and anti-dumping tariffs up to 75.4?me into effect on 23 July 2020.
Sources: Adapted from BBC News, 2013. ‘EU China solar panel war looms’, 8 May; Dalton, M. 2013. ‘EU, China reach impasse on solar panels’, Wall Street Journal, 12 July; Ebels, P. 2013. ‘China-EU trade war looms over solar energy’, EU Observer, 28 July; Econews, 2013. ‘EU, China resolve major solar trade dispute, 29 July; Reuters, 2013. ‘EU won’t impose provisional duties on Chinese solar panels’, 7 August; Blenkinsop, P. 2018. ‘EU ends trade controls on Chinese solar panels’, Reuters, 31 August; Bellini, E. 2020. ‘EU maintains anti-subsidy and anti-dumping duties on solar glass from China’, PV Magazine, 27 July.
Questions
- If you were a European producer of solar equipment, what steps could you take to ensure your business survives?
- In recent years the US government has also imposed trade barriers on a range of products from China, Canada, and European countries. How can firms in these countries respond to the targeted trade barriers imposed by the US?
