NEW ENERGY: Unraveling Accelerates For EU-China Solar Deal

Bottom line: A deal designed to avoid punitive tariffs on Chinese solar panels exported to Europe is rapidly collapsing, with new anti-dumping tariffs likely to be imposed by the end of the year.

New clouds loom in EU-China solar war

A looming clampdown on Chinese solar panels in Europe is rapidly accelerating, with word that the EU will review part of a landmark 2013 agreement that initially helped to prevent a trade war but is showing rapid signs of unraveling. The case centers on the prices of Chinese solar panels, which are typically much lower than their western counterparts due to a wide array of Beijing policies to support the sector.

The US levied punitive tariffs on Chinese panels to address the situation. The EU was set to do the same when several top politicians stepped in and pushed both sides to reach a compromise deal to avoid such action. That deal saw the Chinese manufacturers agree to raise their prices to levels comparable to products from the west. But no sooner did the deal take effect, then the Chinese companies began undermining the agreement by finding ways to secretly refund money to their European customers.

The European manufacturers saw what was happening, and have been complaining loudly to the European Commission to take action. The case now appears to be accelerating, and it looks likely that some kind of corrective action will be relaunched against the Chinese manufacturers in a matter of months.

The latest action looks a bit technical, and applies to a benchmark price for solar panels that is a key part of the agreement reached between the Chinese manufacturers and EU as part of their agreement to avoid punitive tariffs in 2013. Under that deal, the Chinese agreed to set their prices based on a benchmark that included panel prices from both Chinese and non-Chinese manufacturers.

But now the European panel makers are arguing that Chinese panel prices should be excluded from the benchmark calculation, because the Chinese products depress the benchmark to artificially low levels. (English article) The European Commission has agreed to review the case, meaning it could ultimately decide to exclude Chinese panel prices from the benchmark. That would almost certainly raise the benchmark, forcing Chinese panel makers to sell their products for higher prices.

This particular development is just the latest wrinkle in the protests from European manufacturers, who would really just prefer to see implementation of the originally proposed anti-dumping tariffs rather than this attempt to modify the earlier agreement. In a move in that direction, German panel maker Solarworld last week filed a formal request for a probe into its Chinese rivals, saying they were violating the earlier agreement. (previous post)

I’ve personally heard and read about a number of methods the Chinese are using to undermine the agreement. Many involve finding ways to secretly rebate money to their customers, using vehicles like consulting fees to make such payments. This kind of behavior is relatively typical of Chinese companies, which often enter into agreements and then look for ways to undermine those same agreements in ways that will benefit themselves.

A changing of the benchmarking process won’t really address this central problem, namely that many of the Chinese companies will continue to look for ways to sell their panels at very low prices using tricks like backdoor rebates. When the EU comes to that realization, the result will almost certainly be a scrapping of the 2013 compromise deal, and I do expect we’ll see the original plan for punitive tariffs imposed by the end of this year.

Related posts:

(Visited 40 times, 1 visits today)