A majority of EU governments oppose a plan to impose hefty duties on solar panel imports from China, a survey of member states showed on Monday (27 May), undermining efforts by Brussels to pressure Beijing over its trade practices.
The European Commission accuses Chinese firms of selling solar panels at below cost in Europe – a practice known as "dumping" – and plans to impose duties, making it far harder for China to gain market share.
The duties, averaging 47%, are expected to be adopted for a trial period starting 6 June and could be withdrawn if both sides reach a negotiated settlement.
It is the largest trade case the Commission has undertaken, with about €21 billion of China-made solar panels sold in the EU.
The duties are being proposed by the EU's trade commissioner, Belgian lawyer Karel De Gucht, who met with Chinese Vice-Minister of Commerce Zhong Shan for an informal meeting in Brussels on Monday.
The Chinese side described the meetings as "constructive" and said the pair discussed solar duties as well as an EU threat to open an investigation into mobile telecom equipment makers Huawei and ZTE.
But Zhong said that either EU move would lead to a definitive Chinese response.
"Such practices of trade protectionism are not acceptable to China," a spokeswoman for the Chinese mission to the European Union said in a statement, and would "seriously sour the climate on bilateral trade and economic engagement."
"The Chinese government would not sit on the sidelines, but would rather take necessary steps to defend its national interest," if the EU went ahead, the statement said.
Fear of reprisal
The fear of Chinese reprisal and potential loss of business has led Germany, Britain and the Netherlands to be among at least 14 member states to oppose the sanctions, diplomats told Reuters.
The Commission said China was pressuring some EU countries to oppose the duties.
"Commissioner De Gucht … made it very clear to the vice-minister that he was aware of the pressure being exerted by China on a number of EU member states, which explains why they are positioning themselves as they are in their advisory positions towards the European Commission," the Commission said in a statement.
The EU's 27 countries had until last Friday to submit a formal, written response to De Gucht's plans. While the trade commissioner would still have the right to impose the duties, doing so in the face of member states' opposition would be hard.
The Commission statement said De Gucht told China's vice-minister he wanted "to examine the possibility of a negotiated settlement in partnership with the United States should this become necessary."
Provisional duties will more than likely still go ahead on 6 June, once they are published in the European Union's official journal, officials say, but the pressure to roll them back before they become permanent in December will be intense.
The split underlines the depth of division in the EU over how to deal with China, a critical market for many EU exporters and the region's second biggest trading partner over all.
The European Commission intends to open negotiations with China to reach an investment agreement that could lead to a broader trade deal if the two partners can overcome anti-dumping disputes, said the EU executive on 23 May.
The announcement came as Brussels and Beijing are at odds after the European Commission agreed to impose punitive import duties on solar panels from China in a move to guard against what it sees as dumping of cheap goods in Europe.