The Euro Economy

Source: Flickr
Source: Flickr, via Marufish

SolarPower Europe last week presented a letter calling for an end to anti-dumping duties on Chinese-made solar panels and cells to the European Commission (EC). The letter, signed by 34 European solar and renewable energy organisations, stated that the EU solar panel industry derives no advantage from the trade measures, noting that they have contributed to the soaring price of solar products in the 28-nation bloc at a time when they are falling in most other territories. With the tariffs up for review next year, SolarPower Europe and the companies it represents have made clear that they feel doing away with the anti-dumping duties would be good for their trade and the environment.

The duties were imposed back in 2013 after evidence emerged that China was dumping solar products on the EU market, dramatically undercutting domestic manufacturers. The measures were later extended to include Taiwan and Malaysia when the EC discovered the Chinese were using transshipment techniques to bypass EU tariffs and quotas. In December last year, the commission extended its price controls days before they were due to expire, announcing that it would conduct two expiry reviews to establish whether their removal would result in a continuation of Chinese dumping. These types of reviews can take up to 15 months to complete.

According to SolarPower Europe, the tariffs have resulted in EU homeowners and businesses paying more than they need to for solar products. Their implementation and the subsequent price rises they have caused have also resulted in an increase in the amount of financial support the solar industry requires from EU governments, effectively delaying the time when solar can compete with other forms of power generation, the organization claims. Not only are the duties hurting consumers and businesses financially, they are also holding back efforts to “decarbonise [Europe’s} power generation in a cost efficient way”, according to SolarPower Europe.

While it is true that removing the controls would likely result in a fall in the price of solar products and speed the development of the solar sector, the major reason the tariffs should stay in place is one of principle, not economics. China is desperate to be granted Market Economy Status (MES) by the World Trade Organisation, and has been lobbying EU lawmakers for their approval of such a move. Removing the tariffs would have the knock-on effect of further legitimising Beijing’s bid for the status is so craves, boosting its claim to have successfully blended communist dogma with free market principles.

It’s a polarizing issue – The EU is torn on whether or not to support China’s bid for MES, while the US is set dead against it. Earlier this year, the European Parliament issued a scathing rebuke to Beijing on the subject, explaining that China has not fulfilled the minimum criteria to qualify for MES. In May, policymakers from both sides of the chamber united to oppose China’s proposed ascension to the status.

The European Parliament’s thinking on granting China MES is broadly in line with the EC’s. A landmark April decision found that China’s state-owned enterprises (SOEs) are too intertwined with the Party, and increased the regulatory hurdles Chinese companies seeking to buy EU assets have to jump through. In a review of a proposed joint venture between French energy firm EDF and China’s General Nuclear Power (CGN), the EC found that CGN was not independent from China’s central administrator for SOEs, and decided that it had the power to block the deal. According to a Reuters report, the ruling could have serious implications for ChemChina’s $43 billion move for Swiss agriculture company Syngenta, a deal that is already coming under fire in the US from regulators and senior officials alike.

EU institutions realise that Beijing has too much control over the Chinese economy, and that the country’s trade is a very long way off being principally governed by market forces. While some are working hard to make sure that Chinese firms are unable to capitalise on the unfair advantage they enjoy by putting up barriers to market-distorting trade with China, the prospect that others might end protectionist tariffs that protect European businesses’ interests is palpably absurd.

Solar firms need only take a look at the woeful condition of Europe’s steel producers for a flavour of what dumping practices can do to an industry. A glut of cheap Chinese steel has brought the region’s alloy producers to their knees. The lower prices that killing trade tariffs brings come at a price, as the thousands of steel workers who protested against cheap Chinese imports back in February will attest. As well as boosting China’s efforts to demonstrate that its exporters operate under normal market economy conditions, any lowering of trade tariffs could have a disastrous impact on the EU’s solar industry.

The EU’s anti-dumping duties on Chinese-made solar products may well be causing the industry, businesses and consumers some short to medium-term financial pain, but these and other tariffs send a powerful message to Beijing. They must stay in place, if only to demonstrate to China that it must quicken its program of market reform, and that it is a very long way off from achieving its ambition of securing MES. At a time when EU policymakers are rightly putting Chinese companies that want to do business with Europe under greater scrutiny, removing mechanisms that prevent them from distorting the market by dumping state-subsidised products would be utter madness, no matter how vocally some in the solar industry argue to the contrary.

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