Saturday, November 3, 2012

Europe Investigates Chinese Solar Panels

The European Union began a broad investigation Thursday into whether Chinese companies have exported solar power equipment for less than the cost of making it, in what amounts to history’s biggest anti-dumping investigation by value.

The case covers imports from China worth €21 billion, or $26.5 billion, last year, a hefty 6.5 percent of all E.U. imports of Chinese goods. The European case is four or five times larger by value than a similar investigation under way in the United States, because the Union is the biggest export market for Chinese solar panels.

The European Commission, which is leading the investigation announced Thursday, said the Union accounted for 80 percent of Chinese solar equipment sales worldwide.

After exerting heavy diplomatic pressure for the Union not to start the case, and after veiled threats to retaliate, the initial Chinese response Thursday was comparatively restrained.

Shen Danyang, the Commerce Ministry spokesman, said in a statement that China expressed “deep regret,” adding that the trade action would hurt not only Chinese and European industry but also the global development of clean energy.

European leaders including Chancellor Angela Merkel of Germany, wary of retaliation by China, had urged the commission to seek a negotiated solution. China could, in response, impose duties on products it imports from Europe, including polysilicon, one of the main components of solar panels.

Opponents of the trade action warned that it could also undermine European efforts to expand sources of clean, renewable energy to meet its ambitious goals for reducing greenhouse gas emissions. The growth of the Chinese solar equipment industry is due in large part to the billions of euros in government subsidies the Union and national governments have put in place to promote installation of solar panels for homes and businesses.

“Free trade was one of the factors that enabled the European solar industry to become a fast-growing sector,” said Thorsten Preugschas, chief executive of Soventix, a company headquartered in Duisburg, Germany, that builds and operates solar plants worldwide. “We call on the European Commission to bear in mind the severe damage punitive tariffs would bring to the whole European photovoltaic sector.”

The scope of the European investigation is unusually broad, applying not only to fully assembled solar panels but also to imports of key components like solar cells and solar wafers. If the commission were to apply punitive tariffs on such a broad range of imports, Chinese companies could not avoid them by shipping components to Europe and assembling them into finished panels there.

The commission could impose within nine months so-called provisional duties usually lasting up to six months. Within 15 months, the commission must determine whether to impose so-called definitive measures, or duties lasting up to five years.

The next steps for the European investigators involve sending lengthy questionnaires to producers in Europe and China, and visiting their factories, to gather evidence firsthand.

The case could grow more complicated if, as expected, a coalition of companies assembled by SolarWorld of Germany, which brought the initial complaint to the commission, files a second complaint claiming that the Chinese government illegally subsidizes its solar industry.

On Thursday, that coalition, called EU ProSun, said China had been dumping solar panels on the European market for two years, contributing to the bankruptcy of 20 European manufacturers this year alone.

Milan Nitzschke, the president of EU ProSun and a vice president of SolarWorld, said that prices of Chinese solar equipment sold in Europe would have been 60 percent to 90 percent higher last year had the products not been dumped on the market.

Workers were being laid off “day by day, week by week,” said Paolo Gianese, the secretary general of the Industrie Fotovoltaiche Italiane, an Italian industry group. “We are still in time to save our industry. But you have to act quickly.”

Another German company, Q-Cells, once the biggest maker of solar power cells, became the most prominent European victim of an increasingly competitive market when it filed for insolvency in April.
The E.U. trade case against Chinese solar panels differs from the American case in several ways. The European case is, at least for now, limited to allegations of dumping, not improper government subsidies. But the European case is broader than the U.S. action, which covers solar panels for which either the cell was made in China or cells were assembled into the finished panel in China.

The U.S. Commerce Department in May imposed preliminary anti-dumping tariffs of at least 31 percent on Chinese solar panels, in addition to preliminary anti-subsidy tariffs of 2.9 percent to 4.73 percent that were imposed in March.

The Chinese government has responded by accusing American producers of polysilicon, the main material used in solar panels, of engaging in unfair trade practices and has threatened steep tariffs on the companies.
But Mr. Nitzschke, of EU ProSun, said China would be reluctant to impose steep tariffs on imports of polysilicon from the United States and Europe, which are among the world’s largest producers. Ultimately, the brunt of those tariffs would be paid by the Chinese manufacturers that import polysilicon and are already struggling, he said.

Alan Wolff, a trade official in the administrations of three former U.S. presidents and now a prominent trade lawyer, said the Union’s anti-dumping case was the world’s largest ever, even adjusting for inflation.
Two other trade cases that are not anti-dumping cases may have been larger, depending on how the affected trade is measured and what inflation adjustment is used. Those are a long-running World Trade Organization case involving Airbus and Boeing aircraft, and a so-called “safeguards” case in the United States in 1980 against cars from Japan.

But when it comes to anti-dumping cases, nothing matches the case that the Union just filed against Chinese solar companies, said Mr. Wolff, now a senior lawyer in the Washington office of McKenna, Long and Aldridge.

Source: http://www.nytimes.com/2012/09/07/business/global/eu-investigates-chinese-solar-panels.html?pagewanted=all

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