The European Commission has confirmed its intention to impose duties on imports of Chinese solar panels from Thursday (6 June), triggering an immediate response from China, which announced the launch of an anti-dumping and anti-subsidy probe into European wine.
Under pressure from Germany, which fears retaliation from China could hit its export-dependent economy, the European Commission had attempted to tone down the dispute by announcing an initial duty of 11.8%, far lower than the average 47% that had been planned.
The shift reflected the Commission’s desire to avoid a trade war, while also acknowledging opposition to duties from 18 of the EU's 27 member states, led by Germany and Britain.
EU Trade Commissioner Karel De Gucht, a Belgian lawyer and advocate of free trade, on Tuesday (4 June) defended the duties as an emergency measure to provide "life-saving oxygen to a business sector in Europe that is suffering badly from this dumping."
Chinese firms have captured more than 80% of the European solar panel market, from nearly zero a few years ago, and China's solar panel production is 1.5 times the global demand, according to the European Commission.
"This is not protectionism. Rather it is about ensuring international trade rules also apply to Chinese companies – just like they apply to us," De Gucht said.
China's Commerce Ministry said it noted the lower initial rate, but called on the EU to "show more sincerity and flexibility to find a resolution both sides can accept through consultations".
De Gucht: ‘The ball is in China’s court’
While the European Commission has the final say on trade issues, it does not want to be seen to be acting against the interests of member states.
"This is a one-time offer to the Chinese side, providing a very clear incentive to negotiate," De Gucht told a news conference. "It provides a clear window of opportunity for negotiations, but the ball is now in China's court."
De Gucht said the 11.8% duty would apply until 6 August. If no settlement is reached, the average rate will then rise to 47.6%, in effect blocking China's market access. In December, that rate will be put in force for five years.
One Chinese source close to the talks said: "If we face a loaded gun to our heads, it is not a fair negotiation, but at least it creates room for both sides to find a solution."
EU countries divided
The case has tested whether EU governments can unite behind the European Commission on global trade issues and overcome worries about retaliation.
Germany and Britain say their companies could be disadvantaged in China's growing markets such as financial services and telecoms if Brussels hinders Chinese business in Europe.
But France and Italy argue that Chinese firms are unfairly benefiting from state subsidies that allow them to flood Europe with cheap goods and undercut local producers.
The European solar energy market, the world's biggest, is dominated by Chinese suppliers including Yingli Green Energy, Suntech Power Holdings Co Ltd, Trina Solar Ltd and Canadian Solar Inc.
China hits back on French wine
Responding to the EU solar case, China announced the launch of an anti-dumping and anti-subsidy probe into European wine, a move that is expected to hit France and Italy hardest.
China's Commerce Ministry said it has “already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China's market by use of unfair trade tactics such as dumping and subsidies".
"This is impacted upon our wine industry, and [they have] asked the Commerce Ministry to begin and anti-dumping and anti-subsidy probe," the ministry added.
"We have noted the quick rise in wine imports from the EU in recent years, and we will handle the investigation in accordance with the law."
China imported 430 million litres of wine last year, of which more than two-thirds came from the EU, according to Chinese customs figures.
Imports from France alone came to 170 million litres.