Merkel calls for dialogue on EU-China solar trade row

31 August 2012

German Chancellor Angela Merkel this week weighed in on the tense trade relations between Chinese and European photovoltaic manufacturers, urging both sides to resolve the issue through negotiation. Merkel's comments, which emerged during a Tuesday meeting in Beijing with Chinese Premier Wen Jiabao, appear put her at odds with the harder line being pushed by European manufacturers and EU Trade Commissioner Karel De Gucht.

On 24 July, the European Pro Sun coalition, a group of 25 of European solar panel manufacturers headed by the German-based SolarWorld, filed a complaint with the European Commission against Chinese manufacturers for releasing their products at below-market prices, a practice known as dumping. The Commission will have until September to decide whether to pursue an investigation.

The German chancellor has indicted her strong preference to resolve the issues through dialogue and negotiations, rather than through the European Commission. Other European manufactures, including the world's second largest polysilicon maker, Wacker Chemie AG, have also stated their opposition to the filing. The European companies which filed the complaint have requested that punitive tariffs be imposed on Chinese solar products.

China's Ministry of Commerce has stated that the dumping allegations were baseless, and added that protectionist efforts will harm the entire industry. Chinese Premier Wen Jiabao added his support to Merkel's position on the issue.

"To solve the anti-dumping dispute through conversation is an important agreement reached between the two governments today, a showcase of a great way to resolve trade controversy," Wen said.

This case marks the second time this year China has faced allegations of dumping. In May, the United States Commerce Department determined that Chinese producers and exporters had been selling solar cells in the United States at a significant loss and imposed cumulative anti-dumping duties of up to 250 percent on them (see Bridges Trade BioRes, 23 May 2012). According to US-based research firm IHS, the European Union has a higher burden of proof for determining whether dumping did actually occur, and it is unlikely they would follow the United States' example.

While trade relations between solar manufacturers are strained, German and Chinese economies are deeply intertwined, and officials have said there is no danger of a trade war. In 2011, the European Union was responsible for 60 percent of China's US$35.8 billion global trade in solar products. German investment in Chinese companies has topped €26 billion, while China has approximately €1.2 billion invested in German companies.

With the German economy playing a leading role in the European economy, Merkel has been cast by some observers as the de facto representative of the entire European Union. The chancellor and her large delegation is in China this week to meet with Chinese President Hu Jintao and Premier Wen Jiabao to discuss trade issues. Further discussions of the solar industry stand-off during the mission is not expected.

ICTSD Reporting; "Merkel Wants To Resolve Chinese Solar Trade Dispute Through Talks," SOLAR INDUSTRY, 30 August 2012; "Merkel marks 'special' China relationship," FINANCIAL TIMES, 30 August 2012; "Chinese, Germany suggest solar panel talk," CHINA DAILY USA, 30 August 2012; "Nations urged to settle solar dispute via dialogue," CHINA DAILY, 31 August 2012; "Merkel Seeks Solar Talks to Prevent China Dumping Case in Europe," BLOOMBERG, 30 August 2012; "Merkel faces EU clash over China," FINANCIAL TIMES, 30 August 2012; "US-China Renewable Energy Row Escalates with Solar Duty Announcement" ICTSD, 23 May 2012.

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