China, EU 'goodwill' voiced in solar row

Both sides have the willingness and sincerity to deal with issue: minister

China and the European Union have expressed "goodwill" for negotiating a settlement of their dispute over China's solar panel exports, Commerce Minister Gao Hucheng said on Friday.

Gao said the two sides have a consensus that a settlement will have to be reasonable and acceptable to each other.

The European Commission accuses China of dumping solar panels on the EU at below production cost. On June 4, it announced the imposition of 11.8 percent punitive tariffs on imports from China for two months starting from June 6, despite 18 of the 27 EU member states, including Germany, opposing the move.

"Both China and the EU have willingness and sincerity to appropriately deal with the solar panel case through negotiations, and we are also striving for this," Gao said.

He was speaking during a joint press briefing with EU Trade Commissioner Karel De Gucht after the annual bilateral China-EU trade and investment meeting in Beijing.

"We expect the two sides to take a pragmatic and flexible approach in the following rounds of talks, enhancing coordination and cooperation in a bid to reach an agreement that is mutually beneficial, reasonable and mutually acceptable," Gao said.

Some European countries, led by Germany, are opposed to the commission's imposition of duties, with Sweden, Denmark and the Netherlands last week urging De Gucht to find a diplomatic solution with China to avoid a tit-for-tat trade war.

But De Gucht went ahead with tariffs at 11.8 percent, although he softened his earlier plan to levy punitive tariffs averaging 47 percent, leaving a window for the two sides to reach a solution through negotiations by early August.

The negotiations with China are expected to include setting a minimum price at which Chinese solar panel manufacturers can sell in the EU.

"During past days, both China and the EU have been holding communication, contact and consultation at all levels ... the bilateral talks are positive and constructive," Gao said.

China expects to end the negotiations and agree on a deal over the price by August 6, Gao added.

De Gucht said the Chinese and European negotiators started their discussions last week.

"All the European negotiators came to Beijing on Thursday, and were in meetings on Friday on the issue with a very clear view to coming to an amicable solution. So we continue to work on that," he said.

China and the EU have the sincerity to find solutions as quickly as possible, but there has been no breakthrough so far in the talks and such disputes are rarely resolved overnight, De Gucht said.

"As I have stated time and time again during the course of the investigation, the EU has only one wish - to find a negotiated settlement on the basis of 'undertakings' that can remove the injury caused by the dumping on our market. Nothing more, nothing less," De Gucht said.

If no settlement is reached during the negotiations, the average punitive tariff would rise to 47.6 percent from 11.8 percent, which means China's solar producers would be blocked outside the European market. In December, that rate would be put in force for five years.

Yao Ling, a researcher on China-EU relations at the Chinese Academy of International Trade and Economic Cooperation, a think tank, said: "The EU showed its intention to communicate with China when the bloc announced a dramatically reduced initial rate in early June, but more sincerity is needed during the talks otherwise both sides will be hurt by high tariffs.

"There is a possibility that the two sides will agree on the price by August, but the EU would have to make more compromises in the talks."

Tu Xinquan, deputy director of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, is upbeat on a reasonable agreement on the price being reached by both sides in a few months.

"But the negotiations, and also the bargaining, will be very tough," Tu said.

The European Commission launched an investigation into solar imports from China in response to a complaint from SolarWorld, one of Germany's largest solar energy companies. The investigation found that China sold solar goods at a price below the cost of production.

Before this announcement, China had been seeking consultations with the EU, with Premier Li Keqiang telling European Commission President Jose Manuel Barroso that the solar dispute touched on China's major economic interests.

Li also repeatedly said during his recent overseas trip, his first since he took office in March, that the EU's investigation cannot benefit the region itself, when it hurts China and its exports in the sector.

The solar case is the largest trade investigation the European Commission has undertaken. In 2011, the EU's imports of solar goods from China were valued at 21 billion euros ($27.8 billion).

Experts are worried the solar panel investigation and tariffs will lead to escalating trade disputes between the two sides, developing into a trade war.

"If the solar dispute cannot be solved well, disaster will follow and more industries will be implicated," Yao said.

After the tariffs were applied, China announced an investigation into accusations that the EU is illegally subsidizing and undercutting prices for its exported wines, though denying the probe was linked to the EU move.

The EU later responded by complaining to the World Trade Organization about China charging anti-dumping duties on imports of stainless steel tubes, six months after Japan filed a similar case.

Yao Weiqun, associate president of the Shanghai WTO Affairs Consultation Center, said: "We are against a trade war, but China has to fight back and take retaliatory measures when needed."