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EU and China reach solar panel deal

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China and the European union have reached an agreement on solar panels after weeks of speculation that retaliatory action on both sides could exacerbate Europe’s economic woes further, and push China’s economic slowdown into something more than a soft landing.

In the agreement, both sides agreed to curb the imports of solar panels into the EU from China, in exchange for wavering punitive tariffs on shipments.

Chinese and European negotiators have agreed they will set a minimum price for Chinese renewable-energy technology. This would get rid of the need to tax Chinese imports because of artificially low prices (dumping).

What is dumping? – this is a term used in international trade when a manufacturer exports a product to another country either:

  • at prices lower than those in its home market
  • below the cost of production

Background information on the EU-China solar-panel dispute

In September 2012, the European Commission launched an antidumping investigation into the importation of solar panels from China, as well as their key components.

A European industry association – EU Pro Sun – had lodged a complaint on July 25th, 2012, claiming that solar panels and their key components that were imported from China entered the European market at prices below market value.

The European Commission wrote “In terms of import value affected, this is the most significant anti-dumping complaint the European Commission has received so far: in 2011, China exported solar panels and their key components worth around €21 billion ($28 billion) to the EU.

The investigation will take 15 months in total, whereas it is possible according to trade defense rules to impose provisional anti-dumping duties within 9 months, provided there is sufficient prima facie evidence of dumping.”

Deal reached after weeks of negotiating

EU Trade Commissioner, Karel De Gucht, said in a press conference on Saturday, July 27th:

“After weeks of intensive talks, I can announce today that I am satisfied with the offer of a price undertaking submitted by China’s solar panel exporters, as foreseen by the EU’s trade defence legislation. This is the amicable solution that both the EU and China were looking for.

We are confident that this price undertaking will stabilize the European solar panel market and will remove the injury that the dumping practices have caused to the European industry. We have found an amicable solution that will result in a new equilibrium on the European solar panel market at a sustainable price level.

Upon consultation of the advisory committee composed of Member States, I intend to table this offer for approval by the European Commission.”

According to the European Union, the offer by Chinese exporters came after several weeks of intensive negotiations. Anti-dumping duties had been levied on imports of solar panels from China on June 6th, 2013.

The extra import tariffs would have been imposed in two stages, initially 11.8% on June 6th, 2013, and then 47.6% (average) on August 6th, 2013.

The price pledges are a form of a friendly agreement in trade defense negotiations permitted by EU and WTO (World Trade Organization) laws.

According to the European Commission “It is an alternative form of a measure: a duty is replaced by a price undertaking based on a minimum import price. Those exporting Chinese companies participating in the price-undertaking will be subject to its terms.” Therefore, Chinese exports will be exempted from anti-dumping levies.

The terms of the undertakings were proposed by the Chinese Chamber of Commerce on behalf of Chinese exporting companies of solar panels.

Karel De Gucht said that the settlement aims to strike a balance between two important elements:

  • It removes the presence of injurious dumping
  • It secures a stable supply of solar panels and components to the EU market

What exactly does a price-undertaking mean?

A price-undertaking, as set out in EU and WTO law, is recognized as one under the following conditions:

  • Exporters commit to recognize minimum import prices. This is not a price fix, but a floor on prices, i.e. they cannot fall below an agreed minimum.
  • The price-undertaking must remove the effects of the injurious dumping.
  • The undertaking requires the EU’s ability to monitor it.
  • General policy considerations, including the stability of supplies, can play a role.

Solar panel market set to grow

In May 2013, Lux Research predicted that the PV (solar photovoltaic) market will rise from its 2011 crisis and grow to $155 billion globally by 2018.

The authors say the growth will jump from 35 GW (gigawatts) this year to 61.7 GW in 2018.

Lead author of the report – ”Market Size Update 2013: Return to Equilibrium” – Ed Cahill, said “Manufacturers’ nightmare is turning into a long-term boon for the industry. Record low prices pushed gross margins to near zero or below, but they’ve made solar installations competitive in more markets. Supply and demand will come back into balance in 2015, easing price pressure, returning manufacturers to profitability and restoring the industry to equilibrium.”

According to IMS Research, the top ten Solar Panel Manufacturers in 2012 were:

  1. Yingli (China)
  2. First Solar (USA)
  3. Suntech (China)
  4. Trina Solar (China)
  5. Canadian Solar (most of its plants are in China)
  6. Sharp (Japan)
  7. Jinko Solar (China)
  8. JA Solar (China)
  9. Sunpower (USA)
  10. Hanwa SolarOne (China)