By Gerard Wynn
LONDON, June 13 The European Union, United
States and China are most likely to resolve a multi-billion
dollar trade dispute over solar power equipment by agreeing on a
floor price for Chinese products.
The EU's executive Commission and the United States
Department of Commerce have said that China is selling solar
panels and components at far below fair market values and
pushing European and U.S. companies into insolvency. Chinese
sales to both regions exceeded $30 billion in 2011.
They say the alleged dumping is a result of massive Chinese
over-capacity, which is a result of a government-supported
The first evidence emerged last week that trilateral talks
were proceeding, at least informally.
The United States announced at the end of last year that it
would impose anti-dumping and anti-subsidy (or countervailing)
duties on Chinese solar modules and cells.
The European Commission is one step behind with the
introduction last week of provisional anti-dumping duties on
Chinese modules, cells and wafers, and the rate will rise
dramatically from Aug. 6.
The Commission is also due to decide on provisional
countervailing duties by Aug. 5. These provisional duties are
collected only if tariffs are subsequently made definitive and
can be back-dated by three months.
EU member states will have to make a definitive decision on
both types of tariffs by Dec. 5. If EU countries support
definitive tariffs, they would then be implemented for up to
But their likely decision is unclear. Most EU member states,
led by Britain and Germany, currently oppose the tariffs, trade
diplomats said, due to fears of Chinese reprisals.
The price impact of duties will be considerable.
The average wholesale price for Chinese solar panels is
around $0.70 per watt, as reported by module makers.
The United States has imposed final anti-dumping tariffs of
around 30 percent on major producers and countervailing tariffs
of around 15 percent.
The EU has applied an average provisional anti-dumping
tariff from August of 47.6 percent.
The implication is that Chinese imports will be nearly half
as expensive again, effectively returning prices to 2011 levels.
Average module prices charged by top Chinese producers fell 46
percent last year, manufacturer data show.
Solar panels account for less than half the full installed
cost of projects, implying that the overall cost for those who
use Chinese panels could rise by nearly a quarter.
There are several ways to mitigate higher prices.
Installers can absorb some of the extra cost, sacrificing
their profit margins to maintain demand, and can obtain solar
panels from other exporters or from expanded domestic
Chinese exporters may avoid U.S. duties through a convoluted
outsourcing of part of the supply chain, called a tolling
arrangement. The exporter makes solar wafers in China, then pays
a producer in another country to make these into solar cells,
which it ships back into China for final assembly into solar
panels for export.
"Modules, laminates, and panels produced in China from cells
produced in a third-country are not covered by these
investigations," the U.S. Department of Commerce said last
The EU duties have a wider scope, applying to all imports of
solar modules, cells and wafers from China, with no reference to
such third-country exceptions.
A more long-term solution is a negotiated settlement.
Talks have started, informally at least, according to Mike
Froman, a White House international economic affairs adviser who
spoke at a Senate hearing on his nomination to be U.S. trade
"There have been some initial discussions with both the
European market and China about how to deal with this on a
global basis," he said on June 6.
The European Commission, when it kicked off anti-dumping
tariffs on June 4, referred to the possibility of agreeing on a
minimum price for Chinese imports.
"The Commission has indicated it is open to discuss with
China other measures which would be equivalent to the 47.6
percent duty ... an agreement not to sell below a minimum
price." ("Memo: EU imposes provisional anti-dumping duties on
Chinese solar panels", European Commission, June 2013)
Under such an undertaking, exporters would agree to raise
prices until they had wiped out the impact of dumping.
That is a formal procedure under the World Trade
Organisation, which defines it as an "undertaking by an exporter
to raise the export price of the product to avoid the
possibility of an anti-dumping duty".
Under EU law, the Commission can accept such offers and
terminate an anti-dumping tariff once member states are happy
that it ends injury to domestic producers.
The Commission has already defined injury as gross returns
of less than 10 percent of revenues.
"When calculating the amount of duty necessary to remove the
effects of the injurious dumping, it was considered that any
measures should allow the Union industry to cover its costs of
production and to obtain a profit before tax. ("Commission
Regulation of 4 June 2013 imposing a provisional anti-dumping
"It is thus considered that a profit margin of 10 percent of
turnover ... could be regarded as an appropriate minimum."
Such language seems to provide enough room for negotiation
to avoid a costly trade dispute. And given the parlous financial
state of some Chinese solar equipment manufacturers, the
prospect of being able to sell at higher prices may not be a bad