By JAMES KANTER and KEITH BRADSHER
Source: The New York Times
BRUSSELS — The European Union moved on Tuesday to impose tariffs of 11.8 percent on solar panels from China, only one-quarter of the expected level, as an intensive Chinese diplomatic effort over the past week appeared to result in Brussels officials backing down.
Karel De Gucht, the union’s trade commissioner, said that the tariffs would bounce up in early August to 47.6 percent if the government in Beijing does not remedy what the European Union contends is a systematic effort by Chinese firms to sell solar panels in Europe below the cost of making them, a practice known as dumping.
“The ball is in China’s court,” he said, referring to negotiations expected over the next two months. The period of the lower tariff “is a window of opportunity of 60 days,” he said. But windows “can also shut,” he warned.
Earlier, the trade commissioner had indicated he would stand firm behind recommended duties of as high as 47.6 percent in order to defend the credibility of European Union trade rules. But pressure had been mounting on him to back off.
Premier Li Keqiang of China bypassed Mr. De Gucht during a visit to Germany last week and persuaded Chancellor Angela Merkel to call for further negotiations. He then went over Mr. De Gucht’s head on Monday night with a phone conversation with the European Commission president, José Manuel Barroso.
Mr. Li warned that China was ready to retaliate if the European Union took action. The state-run Xinhua news agency said that Mr. Li had warned Mr. Barroso that “there would be no winners in a trade war.”
The solar panels represent one of the largest categories of Chinese exports to the European Union, worth more than 6 percent of China’s exports to the Continent.
“Our action today is an emergency measure to give lifesaving oxygen to a business sector in Europe that is suffering badly from this dumping,” Mr. De Gucht at a news conference in Brussels.
“This is not protectionism,” insisted Mr. De Gucht, adding that the United States had also applied duties to Chinese solar exports. China was carrying out “dumping that has the potential to destroy an important industry within Europe if we do not act today,” he said.
He said Chinese exporters had captured 80 percent of European Union’s market share, and he suggested that “massive overcapacity” in China had led the Chinese to flood the European market. China is “producing today one and half times the amount of solar panels the world needs,” he said.
In a nod to the heavy lobbying in Europe against the duties, Mr. De Gucht said “cheap and plentiful seems great, but ultimately this will lead to a race to the bottom” where “everyone loses.”
Western governments and trade associations have long contended that Beijing has helped several Chinese industries take over global markets through a combination of huge loans from state-owned banks, extensive government research programs, protection of the domestic Chinese market from imports and sometimes even industrial espionage.
China’s rapid expansion in renewable energy, a national priority, has long been cited as an extreme example.
China went from a negligible player in the solar panel industry as recently as 2006 to the dominant world producer now, with two-thirds or more of global manufacturing capacity in the sector following $18 billion in loans from state banks.
That expansion contributed to the bankruptcy of or capacity cutbacks at a score of American and European solar companies in the last three years. Chinese solar panel companies have also suffered lately from overcapacity, with Suntech Power of Wuxi, China, putting its main operating unit into bankruptcy in March.
Li Junfeng, a senior Chinese government energy policy maker who is also the president of the Chinese Renewable Energy Industries Association, expressed delight when told that the European Union had sharply lowered its target for the preliminary tariffs.
“That’s really good news,” said Mr. Li, a senior energy official at the National Development and Reform Commission, China’s main economic planning agency. “At 11 percent, the Chinese companies can do very good business — it doesn’t affect them very much.”
The European Union’s decision to impose much lower initial duties than expected could greatly reduce the incentive for the Chinese government to offer concessions in further negotiations.
Yet individual Western companies, in the solar industry and other sectors, have been very wary of taking any public stand against China, which has become the world’s largest market in industries ranging from steel to cellphones to automobiles. Chinese officials have considerable discretion in issuing factory permits, export licenses and even visas for visiting executives, making most companies leery of publicly voicing any criticism whatsoever of China or any support for trade actions against it.
Mr. De Gucht has become so frustrated with the unwillingness of European companies to publicly support any trade action against China that he said last month that he was prepared to launch a trade case against China on certain kinds of telecommunications equipment even without the public support of any European companies in the sector.
SolarWorld, a German company, has brought anti-dumping and anti-subsidy cases against China in the United States and the European Union in the past two years. But its executives waited to file the cases until the company was already financially struggling. SolarWorld is also unusual in that it is not a diversified company but dependent on a single narrow sector in which China’s market is still a small although growing share of global demand.
On Tuesday, Milan Nitzschke, a vice president of SolarWorld, a German company that is part of the coalition of European firms that filed the anti-dumping case with the European Commission in July 2012, said in a telephone interview, “I’m not against giving a time window for negotiations, but China has to move.”
A settlement should require the Chinese to make “an agreement on prices and volumes, so that there is not dumping onto the market,” Mr. Nitzschke, who is also president of EU ProSun, the European coalition.
Mr. Nitzschke also said that European Union countries, including Germany, would be more willing to support higher duties if China failed to negotiate in good faith during the next few months.
The European Union, like the United States, designates China as a nonmarket economy, which means that anti-dumping penalties are calculated under special rules that almost always produce very high tariffs -- unless political leaders intervene.
Solar panel production is in some ways a chemicals industry, as much of the cost of a panel lies in the materials that are used to assemble them. Senior executives at two of the world’s largest chemicals companies expressed misgivings on Tuesday about any kind of showdown with China over the solar industry, following the pattern of individual companies being reluctant to endorse trade actions against China.
Thomas M. Connelly Jr., the executive vice president and chief innovation officer at DuPont, said Tuesday before the announcement in Brussels that his company was worried that the uncertainty caused by trade cases was hurting investment in solar panels and in renewable energy industries more broadly. He specifically criticized Europe’s plans to impose tariffs, saying in a telephone interview from Beijing that, “These kinds of trade actions are unhelpful.”
Martin Brudermüller, the vice chairman of BASF, the German chemicals giant, expressed concern about the potential for escalation in the trade dispute. “A tit-for-tat policy will more destabilize than help us,” he said when asked about the dispute during a news conference in Hong Kong on BASF’s ambitious investment plans in China and elsewhere in Asia. The news conference was held several hours before the European announcement.
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