What’s behind the European-Chinese solar panel dispute?

05 Jun

Karel De Gucht On World Environment Day, celebrated every year on June 5 to raise global awareness of environmental issues, both environmental advocates and clean-tech leaders take to the streets to campaign for clean-renewable-energy. However, this year while environmentalists are descending upon Brussels, European Union trade officials have been implementing new trade tariffs on China’s multibillion-dollar solar panel industry.

Karel De Gucht the bloc’s trade commissioner, announced the tariffs would initially be set at 11.8 percent , about a quarter of what he had originally threatened to levy yesterday. However, despite the initial optimism, two months later, as of Aug 6, the average tariff will rise 47.6 percent and the duties will range anything from 37.2 percent to 67.9 percent.

Chinese companies have been accused by the EU of carrying out dumping, a practice in which companies sell a product either bellow the cost of production, or below the price in the Chinese market. Mr. De Gucht commented that “the ball is in China’s court,” in a news conference held on Tuesday. The period of the lower tariff “is a window of opportunity of 60 days,” he said, adding that windows “can also shut.”

Beijing fears that the new tariffs will result in $26 billion in losses and the friction could affect between 4-5 percent of China’s trade with Europe. With a possible European-Chinese trade war looming, an increasing urgency for renewable energy and another notch in the Western ‘containment’ policy, one has to ask whether there’s more to the new tariffs than accusations of dumping.

This is not the first accusation of this kind aimed towards China. In October 2012 the US implemented steep tariffs ranging from 18.32 percent to 249.96 percent on Chinese solar panel imports. The tariffs were brought on by a complaint to the Commerce Department, from Solar World Industries America INC, a US subsidiary of German producer of photovoltaic cells and modules. The company complained that Chinese manufacturers were able to sell goods cheaply through receiving subsidies from the government. On the other hand, China has vehemently opposed US anti-subsidy policy both in the WTO and in US courts. And well for good reason, as anti-dumping proposals, despite the words negative connotations, attempt to destroy competitive rivals, benefit domestic producers, maintain Western monopolies, stifle developing economies and are far from creating free and fair trade.

Anti-dumping laws are primarily used by leading Western economies of the US, the EU, Canada, Australia and New Zealand. However, since the 1980s this has expanded to include numerous states, with varying legal definitions, throughout the developed and developing world, insuring tit-for-tat actions. Nonetheless, despite other countries imposing anti-dumping laws, Western nations tend to lead in implementation which benefits their own domestic companies.

So is China really carrying out dumping? And what is the real reason behind EU and US anti-dumping tariffs? There is no doubt that the Chinese government has heavily subsidised Chinese companies and targeted specific industries in order to dominate the global market. Nonetheless, this is a common practice of every nation let’s not forget Monsanto, which gets billions in US farm subsidies every year to dominate the global food market. On top of the government subsidies, the company also has an unprecedented corporate impunity and is dumping cheap GM foods on to developing markets. Since 2008 China has heavily subsidised solar panel companies, to insure stability and growth in the Chinese solar panel industry, in which China has unique opportunity over.

China is currently the market leader for rare earth metals, controlling 97 percent of the world’s production. Despite other countries starting to mine rare earth metals and open their own markets, China is liable to hold a monopoly over the industry for the next few years. Rare earth metals such as Silicon and Cadmium are key components in solar panels, used to create solar cells. According to China in order to protect resources and the environment, China has set production caps and export quotas. This has resulted in outcry from the US and EU, with accusations of stockpiling and the lodging of trade complaints.

It does not take much to work out that China’s monopoly of the rare earth mining industry, the ability to supply cheap resources, and an ever increasing demand for clean renewable energy, has given China a unique opportunity to dominate the renewable energy industry.  China has the opportunity to give its companies subsidies of cheap rare metals and has a unique opportunity in dominating a critical industry, which could result in the same opportunity for the Chinese economy as the oil industry had for the US. Due to China’s advantages in both, the rare earth mining and renewable energy industry, Western fears of China having monopoly over such critically important industry is clearly obvious. For this reason the US and EU, especially with their new ‘containment’ policy have an interest in stopping Chinese monopolies and force China to stop its rare earth export quotas.  This will seriously affect China and its developing renewable energy industry and liable bring China and the European Union into a tit-for-tat trade war.

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Posted by on June 5, 2013 in China


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