EU, China staring at solar cell trade war

Robin Emmott and Michael Martina Brussels and Beijing

China’s leadership transition is complicating talks to resolve a multibillion-dollar dispute with the EU over solar panels, pushing both sides closer to placing punitive tariffs on each other’s exports and risking a trade war.

The newly appointed chief of China’s Communist Party, Xi Jinping, is set to take over the presidency at a national congress in March. But the full line-up of government officials is not yet in place and China’s commerce minister is likely to step down after what some have said was a political snub at the party’s congress last November.

EU leaders want to avoid following the US’s decision last year to impose duties on Chinese solar power products, aware that Europe needs China to help it emerge from three years of economic crisis.

But EU officials and diplomats accuse the Chinese of stonewalling, saying they have made little progress as they are unable to get beyond outgoing Commerce Minister Chen Deming. They complain of a limbo in the ministry that will not end until after the March congress.

Chinese commerce ministry spokesman Shen Danyang told reporters in Beijing this week that officials were “conducting consultations and relevant response work with the concerned parties”, but did not comment on any impact China’s leadership transition was having on talks.

Highlighting the risk of a trade war, Chinese solar companies also accuse the EU of wrongdoing.

China says Europe illegally favours its domestic solar panel producers and Beijing is considering its own duties on EU exports of polysilicon, used to make solar panels.

Complicating things, some European distributors and installers of Chinese panels say EU tariffs on China would damage Europe’s efforts to develop clean energy. They say solar energy is only efficient using Chinese products that are up to 45 percent cheaper than those made in Europe.

The EU’s investigation must culminate in a decision by June. In reality, that is likely to come by mid-April, when diplomats from the EU’s 27 countries make their recommendation to the European Commission, which is handling the case.

Such a time frame does not give a new trade minister in Beijing much time to get acquainted with the issues and reach a settlement. EU trade commissioner Karel De Gucht said there was no chance of tweaking the investigation’s deadline. – Reuters