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The solar-panel ball is in the EU's court

The European Union Trade Commissioner Karel De Gucht announced earlier this month that the EU will impose a tariff of about 11.8 percent on imports of Chinese solar panels, cells and wafers from early June, which will increase to 47.6 percent in August unless a settlement is reached with China in the next 60 days. The trade row is the world's biggest anti-dumping case by sales volume, according to EU officials

Leaving aside whether the investigation process has been fair or transparent enough, it is without doubt that no side will be the winner should the EU slap punitive measures on solar panels, cells and wafers made in China.

The decision, another blow to China's efforts to promote one of its important export industries, will cost China over 20 billion euros ($26.55 billion) a year and 400,000 jobs.

But as the market shares of the United StatesJapan and China in the solar panel sector continue to expand, the impact of the provisional tariff will be limited, and China will further boost its domestic market for solar energy and introduce supporting policies.

The EU, however, stands to lose more from its decision to impose duties, which was made despite protests from hundreds of European solar companies, 15 European photovoltaic associations and various trade groups, which warned that the tarrifs will harm not only the European solar industry, but also the European economy as a whole.

A great number of European importers and installers of solar panels have expressed their "deep concerns" about a volatile market as a result of higher cost solar products, which will severely hinder the competitiveness of European businesses in the solar industry. European consumers of solar energy, especially in countries such as Italy, Germany, Portugal and Spain, where affordable solar energy has been integrated into the national power grids, may have to pay more for electricity. What's more, at a time of a second economic recession in the EU and record unemployment, up to 240,000 European jobs in downstream businesses could be at risk according to the findings of Prognos, a Germany-based economic research organization.

The Alliance for Affordable Solar Energy, a coalition of over 350 companies, is opposed to the introduction of import tariffs, and it has orchestrated a letter signed by 1,024 companies to Karel De Gucht. It argues the problems faced by European solar manufacturers are more the result of over-capacity in the global solar market caused by the economic slowdown than competition from China.

Several EU nations, including Germany, have spoken out against imposing special duties and urged the commission to reach a settlement with China. "The German government explicitly rejects the preliminary anti-dumping measures planned by the European Commission," German Economy Minister Philipp Rosler repeated on Tuesday. "We believe this step would be a serious mistake."

Altogether 18 EU member states voted against the provisional tariff just one week before the commission's decision, fearing that higher cost of solar panels will lead to a slowdown in the deployment of the technology and job losses across the industry.

All these seem to be not enough to stop the commission from introducing the duties. China's efforts and its long-standing contribution to help the European economy recover from the dire effects of the crisis have also been overlooked. At the end of May, China sent a delegation to EU for consultations. This goodwill was not reciprocated. The day before the commission's decision, Chinese Premier Li Keqiang spoke to European Commission President Jose Manuel Barroso by telephone, expressing China's willingness to communicate with the EU on relevant issues under the existing bilateral trade mechanism to find a solution acceptable to both sides, so as to jointly promote the continuous development of the China-EU comprehensive strategic partnership.

On June 5, China decided to begin an anti-dumping and anti-subsidy investigation into wines imported from the European Union. Now many fear that more is yet to come.

An all-out trade war might be a worst-case scenario. But is the ball now in China's court? As the Chinese commerce ministry spokesperson said, the Chinese side has already fully expressed its views, made the ultimate efforts it can and displayed sincerity. Will there be a deal to avoid an escalation of trade friction? It's entirely up to the EU.

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