Negotiations are key to avoiding a looming trade war over EU tariffs on Chinese solar products

Despite opposition from 18 EU member states, hundreds of EU solar companies and 15 European photovoltaic (PV) associations, Karel De Gucht, EU's Trade Commissioner, announced on June 4 that the EU would impose provisional anti-dumping tariffs on imports of solar panels, cells and wafers from China.

Karel De Gucht (left), the EU's Trade Commissioner, leans toward the host of a press conference on June 4, during which he announced an anti-dumping investigation on Chinese solar products

This is the preliminary ruling of an investigation launched by the European Commission in September 2012. According to the ruling, starting from June 6, EU imports of Chinese solar products would be subject to an interim duty of 11.8 percent until August 6. If China and the EU fail to reach a settlement by then, the duty will be raised to an average of 47.6 percent until Dec 6, 2013. A final ruling schedule on that day would decide whether to turn the provisional duties into definitive measures in the next five years.

This is not the first time that China's solar makers have encountered trade barriers.

In 2012, the United States imposed anti-dumping tariffs of up to 249.96 percent and anti-subsidy tariffs of up to 15.97 percent on Chinese solar panels. The EU's tariffs, however, are more devastating to China's already vulnerable solar industry as the EU, the world's largest solar market, is China's top destination for solar exports.

European imports of China-made solar products totaled 21 billion euros ($27.89 billion) in 2011, accounting for 70 percent of China's total solar product exports and 7 percent of the total trade volume between China and EU, according to an EU estimation.

Due to the trade dispute, Chinese exports of PV products to EU totaled $11.19 billion in 2012, down 45.1 percent year-on-year. Despite the plunge, the EU is still China's largest solar export destination, accounting for 46.1 percent of total exports in 2012, according to a report from the China Market Report Center under Shenzhen Zero Power Intelligence.

A negotiation troop formed by staff from China's Ministry of Commerce (MOFCOM) and China Chamber of Commerce for Import and Export of Machinery and Electronic Products was sent to the EU by the Chinese Government days after the preliminary ruling. But no results had been released to the public by the time this article went to press. Also, the EU's Trade Commissioner Karel De Gucht visited Beijing on June 21 to meet Chinese Commerce Minister Gao Hucheng to discuss the issue.

As the two sides get ready for negotiations on the matter, it has become evident that a trade war is to no one's benefit. Amid fresh trade tensions, China's PV sector is going through a business reshuffle that features a stronger presence in emerging markets and rising domestic demand.

China on the go

China has opposed the EU's duties and called for solving the dispute through dialogue and consultation.

"China is strongly opposed to the anti-dumping tariffs imposed by the European Commission," said Shen Danyang, a spokesman for the MOFCOM, during a press conference immediately following the European Commission's announcement.