EU imposes duties on solar panels

The European Union on Tuesday offered China a temporary reprieve from the full force of anti-dumping tariffs on Chinese solar panels, saying it would impose reduced duties for two months while talks proceed toward resolving the trade dispute.

EU Trade Commissioner Karel de Gucht told a news conference in Brussels that from Thursday through Aug 6, a tariff of 11.8 percent will be in effect against imports of all Chinese-made panels and their two major components, photovoltaic cells and polysilicon wafers.

"Our action today is an emergency measure to give life-saving oxygen to a business sector in Europe that is suffering badly from this dumping," de Gucht said. "Our response is balanced, legal and justified within international trade rules and designed to prevent the situation from turning fatal."

The temporary tariff is a quarter of the 47 percent average of a range of duties - 37.3 percent to 67.9 percent - that the European Commission, the EU's executive body, proposed in May against Chinese panels. Whereas those proposed five-year duties would vary by company, the temporary measure announced on Tuesday will apply equally to all Chinese solar-equipment manufacturers.

The commission, which had set a Wednesday deadline for action in its standoff with China over government subsidies to the solar-energy industry, said tariff-hit Chinese companies will have until Aug 6 to propose an alternative, or the full tariffs will take effect in December.

The Chinese government has said the solar dispute with the EU involves 20 billion euros and up to 5 percent of China's annual trade with the bloc.

"This staggered approach allows a smooth transition for our markets to adapt and it is a one-time offer to the Chinese side, providing a very clear incentive to negotiate," de Gucht told reporters. "It provides a clear window of opportunity for negotiations, but the ball is now in China's court."

Responding to complaints by Germany's SolarWorld AG and other European panel makers, the EU has accused Chinese companies of selling exported panels at below manufacturing cost. Panels made in China now account for about 80 percent of Europe's solar market, and the proliferation of cheaper "dumped" panels have deeply depressed prices and forced several European manufacturers to cut production or seek bankruptcy protection from creditors.

According to the commission, Chinese panels' share of the EU market was only 63 percent as of mid-2009. Between then and June 2012, imports of Chinese photovoltaic cells soared from 8 percent of market share to 25 percent, while polysilicon wafers went from 6 percent to 33 percent.

"We are relieved that the European Commission finally introduced concrete measures. Dumping is fraud and harms the future of solar energy," EU ProSun, a European solar-industry association, said in a statement.

Europe's broadest anti-dumping threat in decades, however, has prompted some leaders in the 27-member EU - notably German Chancellor Angela Merkel - to publicly oppose tariffs, saying they could lead to a trade war with China at a time when many nations that use the euro currency are in recession.

Last week at a state dinner near Berlin for visiting Chinese Premier Li Keqiang, Merkel said she would use Germany's economic and political clout in the EU - her country is the leading European maker of solar panels and parts - to try to stop the tariffs and lobby for a swift negotiated solution. Li, echoing China's official position, said the tariff threat amounted to protectionism.

The Chinese government warned the EU in May that if even provisional duties were implemented, Beijing would "take necessary steps" to defend its national interest, but it didn't specify what those actions might be.

On Monday night, Li called the European Commission's president, Jose Manuel Barroso, to warn that "the case, if not properly handled, would hurt both the Chinese and the EU interests", the Financial Times reported.

Although longer-lasting tariffs would require approval of the European Parliament's council of ministers, de Gucht as trade chief has authority to implement the temporary measures.

He said on Tuesday that he "would prefer a negotiated solution, and quickly - there is no reason for this to last months if there is a sincere desire by our Chinese partners to seek a solution through 'price-undertakings'. But it is the role of Chinese exporters and the Chinese Chamber of Commerce to now step forward with a solution that removes the injury to the European solar-panel industry."

In attempting to avert punitive tariffs, parties accused of dumping goods sometimes propose a "price-undertaking," promising to sell in the affected market above a minimum price. Such concessions are often accompanied by pledges to limit the quantity of items exported.

Imposing duties of any duration on Chinese panels is a mistake, said Robert Sturdy, a British Conservative who is vice-president of the European Parliament's International Trade Committee.

He believes anti-dumping cases should always consider the EU's broad interests, and in this case duties will do more harm than good - costing jobs, forcing up prices for consumers, contravening EU environmental policy and damaging overall trade relations with China.

"If the EU is to grow its economy, then we need to put the wider picture ahead of parochial interests and make trade-defense decisions based on the wider ramifications that they could have," Sturdy said.

Price deflation in Europe and other big export markets such as the United States have hit Chinese solar companies, too. Suntech Power Holdings Co, once the world's biggest producer of panels, is now operating in bankruptcy protection in its home city of Wuxi, Jiangsu province. If the EU's maximum tariffs are implemented, Suntech faces duties of 48.6 percent on its shipments.

Other players in the Chinese industry could ultimately see stiff tariffs as well: JingAo Solar Co, 58.7 percent; LDK Solar Ltd, 55.9 percent; Trina Solar Ltd, 51.5 percent; and Yingli Green Energy Holdings Co, 37.3 percent.

Fu Jing in Brussels contributed to this story.