Doug Young
In a move that will surprise to no one, the European Union has
formally launched a probe into Chinese solar panel makers who are
being accused by European rivals of violating a landmark agreement
that averted anti-dumping tariffs. I should really stop using the
word “landmark” to describe the 2013 deal between the Chinese
panel makers and EU that avoided a trade war.
In fact, it’s
becoming increasingly obvious that a better word to describe the
deal would be “foolish”, since it appears many of the Chinese
panel makers never really intended to follow the spirit of the
agreement to begin with.
The bottom line is that the agreement signed in late 2013, which
averted punitive tariffs against Chinese solar panels, is likely
to be declared void by the end of this year. I personally didn’t
predict this outcome, and at the time I actually congratulated
both sides on finding a more productive way to resolve their trade
disputes than the usual punitive tariffs. But it seems Chinese
companies aren’t ready for this kind of mediated settlement, since
the only language they seem to understand is actual punishment.
According to the latest reports, the European Commission, which
represents the 28 EU member countries on trade issues, has
formally opened an inquiry into whether the Chinese panel makers
deliberately took steps to violate the 2013 agreement. (English article) That deal saw the
manufacturers agree to voluntarily raise their prices to levels
similar to their European rivals, who complained that the Chinese
got unfair state subsidies through policies like cheap government
loans and export subsidies.
The agreement was strongly supported by several prominent leaders
of EU countries, and came after Europe conducted an investigation
and had threatened punitive tariffs. But less than a year later,
European panel makers began to complain that Chinese were
circumventing the deal using a number of tricks, such as offering
refunds to customers through fake consulting contracts.
The complaint that prompted the European Commission to launch its
latest investigation was made by German manufacturer Solarworld
(Frankfurt: SWVK, OTC:SRWRF),
and involves yet another tactic that Chinese panel makers
allegedly used to avoid their own promised price hikes. In that
instance, Solarworld claims the Chinese would transship their
panels to Europe by via other places like Taiwan and Malaysia,
making them appear to be manufactured in those other places and
therefore exempt from the promised price hikes.
Following its agreement to investigate the matter, the European
Commission could take as long as 9 months to reach its
conclusions, the reports say. But I expect that the probe won’t
take nearly that long, as it should be quite easy to determine if
big changes have occurred in panel shipment patterns since the EU
signed its agreement with the Chinese panel makers less than 2
years ago.
At the end of the day, the US comes out looking the smartest in
this whole situation, as it was the first to start investigating
Chinese solar panel makers 3 years ago and later levied its own
punitive sanctions. I don’t know if any attempts were made to
avoid those sanctions through a negotiated settlement like the one
with Europe. But I suspect that experienced trade officials in
Washington were familiar with the tactics used by Chinese
companies, and simply decided to levy the sanctions because they
knew a negotiated settlement was likely to run into this kind of
problem.
At the end of the day, the only real longer-term solution is for
China to end this kind of state support that too often results in
trade wars. That won’t be easy, as this kind of support has a long
tradition in China due to the country’s socialist past when all
businesses were owned by the state. But until that happens, this
kind of trade war will continue, and western countries are
unlikely to try the negotiated settlement approach again after
this failed experiment in Europe.
http://www.altenergystocks.com/archives/2015/06/eu_likely_to_impose_sanctions_on_chin ese_solar_cos.html