Engineers in a solar panel manufacturing park in Anhui province evaluate a field of panels. China has around 500 manufacturers in the solar panel industry and Europe is among the major buyers. Provided to China Daily

In what has become Europe's largest trade dispute, it seems few want punitive tariffs slapped on Chinese solar panel imports

Proposals to impose punitive anti-dumping duties on Chinese solar panel exports worth 21 billion euros ($27 billion) has brought the European Commission to the brink of a trade war and has divided its members.

Although it was a German manufacturer that prompted the action from Brussels, it is Germany that is leading the opposition.

A worker in a solar panel manufacturer in Jiangsu province performs a final check on a batch of products before they are exported to Europe. Si Wei / for China Daily

Chancellor Angela Merkel, who is due to meet Chinese Premier Li Keqiang on Sunday in Berlin, had suggested the dispute be settled by dialogue rather than launching an investigation. Her vice-chancellor and economy minister, Philipp Roesler, has warned that levying anti-dumping tariffs on solar panels from China would be a "grave mistake".

"Punitive duties are the wrong instrument," he said in an interview with Welt am Sonntag newspaper. "The German industry is quite rightly very concerned."

The Financial Times quoted Roesler as saying: "I expect the commission to do everything to prevent an all-out trade conflict. The commission must aim for a negotiated solution and dialogue."

An EC decision on whether to impose a provisional average anti-dumping import tariff of 47 percent is expected early next month. When its full 15-month investigation ends in December, it could impose the tariffs for five years if it decides Chinese companies have not changed their trade practices.

The first-round talks between China and the European Commission over a solar trade probe broke down, says China Chamber of Commerce for Import and Export of Machinery and Electronic Products on May 22. Meanwhile, the European Union excludes further talks until preliminary determinations on the probe are published.

With investors hesitant to put money into building solar power plants, European business leaders also have called on Brussels to stop further punitive measures.

Ulrich Grillo, president of BDI, the German manufacturers' association, said in a statement, reported by the BBC, that every possibility for negotiation must be exhausted before action is taken to impose duties.

Even many European solar companies competing against Chinese producers claim that tariffs will not help protect or benefit them.

Some say the measures will damage the EU's image as a pioneer of green technology leading the fight against climate change. The rise in the cost of solar panels and solar plant installations because of tariffs will result in a major setback to the introduction and spread of clean power sources.

Earlier this month after Chinese manufacturers had reportedly dumped solar panels in Europe, or sold them below cost, Karel De Gucht, the EU trade commissioner, proposed provisional anti-dumping duties, with some companies paying 37 percent and others up to 68 percent. Companies that do not accept the investigation or cooperate with it will suffer higher rates.

Not surprisingly, his recommendations have angered Chinese manufacturers and exporters. The Chinese government has repeatedly warned Brussels not to send the "wrong signals".

China has around 500 manufacturers and 400,000 workers in the solar panel industry.

According to the European Photovoltaic Industry Association, around 70 percent of the PV supply chain's value in the EU market is created in Europe. It's worth 40 billion euros and provides 265,000 EU jobs.

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The EU ProSun group of solar businesses, headed by Germany's once-dominant panel maker SolarWorld, which last year complained of the dumping of subsidized Chinese products and instigated the EC investigation, employs 8,000. It claimed solar module prices had dropped 75 percent between 2009 and 2012, and posted preliminary losses of 0.5 billion euros for last year, and 200 jobs lost in Germany.

However, a study by Prognos, a German research consultancy, estimated that 115,600 could be lost in the EU as a result of anti-dumping duties, with upwards of 4.7 billion euros in total lost revenue.

With record high unemployment of nearly 12 percent in Europe, industry insiders say it is crucial to keep these "green jobs" by using affordable imports from China, and keeping its factories running.

With more than 1,000 signatories, the Alliance for Affordable Solar Energy sent a letter to De Gucht in April, warning that increased prices for Chinese solar products would mean a much lower demand for photovoltaic installations and components.

AFASE claims anti-dumping duties will not help EU solar producers, some of which are less cost-competitive than other producers worldwide.

"Their own strategic decisions have burdened them with high-cost structures which weigh heavily and make them especially unable to compete against the backdrop of the overall decrease in prices," says the AFASE, which had commissioned the Prognos study.

It says that European producers' high costs can be attributed for instance to their dependence on long-term contracts for polysilicon at prices significantly higher than today's spot market prices.

AFASE says Chinese producers of cells, wafers and modules have created highly cost-efficient production processes, using integrated state-of-the-art production facilities, economies of scale, lower labor costs and R&D developments.

Wouter Vermeersch, CEO of Belgian company Cleantec Trade, a member of AFASE, told the alliance in a statement: "The solar business is very price sensitive. If prices are artificially increased by punitive tariffs, the European solar market would simply come to a standstill with disastrous effects on green jobs."

Indeed, some European companies downstream in the solar power industry have eschewed the thought of protectionist measures and made their views known to Brussels.

"These guarding measures will endanger more than 70,000 jobs in medium-sized companies in Germany alone," Udo Mohrstedt, CEO of IBC Solar, told the BBC. "The commission must stop this dangerous protectionism."

fujing@chinadaily.com.cn

(China Daily 05/24/2013 page16)