November 8, 2012 3:19 pm

EU steps up solar panel pressure on China

The EU has ratcheted up a trade fight with China over solar panels, launching an investigation into alleged subsidies granted by Beijing to the country’s manufacturers.

The investigation, which could result in increased tariffs for Chinese exporters, follows a related probe that the European Commission, the EU’s executive arm, opened in September into allegations that Chinese companies were dumping – or selling below cost – solar panels in the EU.

China’s solar exports to the EU totalled more than €21bn last year, making the trade case the biggest in the bloc’s history by a wide margin, based on the value of the goods covered.

Beijing has made good on threats to retaliate, but so far in a deliberate and calibrated way that suggests Chinese officials want to avoid a trade war.

China last week launched its own anti-dumping investigation into EU exports of polysilicon, the prime ingredient in solar products. In a bid to pre-empt Brussels, Beijing this week challenged the legality of solar subsidies in Greece and Italy at the World Trade Organisation.

The clash reflects the tensions over the renewable energy industry, on which both China and the EU have placed big strategic bets. The US has also joined the fight, imposing both anti-dumping and anti-subsidy duties on Chinese solar panels.

More broadly, it underlines a growing debate over the use of state subsidies, which governments have increasingly deployed to prop up favoured industries in a weak global economy.

Karel De Gucht, the EU trade commissioner, has argued that many of the subsidies granted by Beijing – particularly export credits – are illegal, and has made it a priority during his tenure to focus attention on such practices.

In a move that has unnerved Beijing, Mr De Gucht has been preparing a possible anti-subsidy case against Chinese manufacturers of telecoms equipment.

The latest solar investigation was spurred by a coalition of 25 solar companies known as EU ProSun, whose chief backer is Germany’s SolarWorld. Many of the allegations in its subsidy complaint were already previewed in the dumping version.

Specifically, it has accused China of offering huge amounts of subsidies, in the form of cheap financing, so that its solar companies could sell their products below cost in the EU, the world’s biggest solar market.

“Chinese state banks have pumped cheap money into what should be bankrupt companies who have then flooded the EU market with dumped solar products,” said Milan Nitzschke, EU ProSun’s president.

Mr Nitzschke claimed that the China Development Bank – one of many state banks – has given €33bn in inexpensive credit lines to a dozen solar companies since 2010. He pleaded for urgent action to help arrest a wave of plant closings and bankruptcies among European manufacturers.

After years of rapid growth, solar manufacturers in both the EU and China are now reeling from a capacity glut and plunging prices.

Under EU law, the commission must decide within nine months whether to impose provisional duties. Privately, EU officials say they would be keen to find a negotiated solution with Beijing.

Not all EU companies in the industry are complaining. The retail companies that install panels like the cheap Chinese products. Via an industry coalition they sought to emphasise how the entire solar industry, including groups from Europe and the US, had benefited from policies including subsidies in the push for broader use of greener energy.

In a statement released on Thursday, the Alliance for Affordable Solar Energy, an industry coalition, said: “It should not be forgotten that the entire solar sector, in China as well as in the EU, has benefited from some sort of public support driven by the policy goal of promoting renewable energy. This support has contributed significantly to the fact that the solar industry ranks among the most dynamic and fastest-growing industries.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE