The Sun Breaks Through Stormy Skies of China/EU Trade

China and the West broke a decades-old pattern of troubled trade relations over the weekend with a landmark deal to settle a trade dispute between China and the EU involving Chinese manufactured solar panels. Leaders in China and the West should use this breakthrough agreement as a template for resolving future trade disputes, turning to compromise rather than destructive accusations and punitive tariffs to end their disagreements.

Trade between China and the West has grown rapidly over the last two decades following China’s economic reforms to create a more market-oriented economy. The EU and the US are now China’s two biggest trading partners, with combined exports to both markets totaling more than $700 billion last year – greater than China’s entire exports a decade ago. Disputes are almost inevitable with such rapid growth, and many of those are related to China’s policies of State support for many big companies and key industries.

The solar panel dispute began two years ago when the sector suddenly plunged into a downward spiral after nearly a decade of explosive growth. A major cause of that downturn was a rapid buildup of capacity in China, as China rolled out favorable policies like tax incentives and cheap loans to promote development of a cutting-edge sector with big growth potential. As prices tumbled, a growing number of companies in the US and Europe went bankrupt, with many blaming cheap imports from China for their woes. Washington opened an investigation into the matter, which ended with the imposition of antidumping tariffs against Chinese manufacturers last year. The EU followed with its own investigation, and announced its own tariffs this spring.

Written by Doug Young. To read the full article, click here.

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EU, China settle solar-panel dispute

Chinese producers agree to minimum price for exports.
The European Union and China yesterday settled their dispute over the export of underpriced Chinese solar panels.

The agreement came nearly eight weeks after the EU imposed punitive tariffs on solar panels and their components, solar cells and wafers. The levy was set at 11.8%, but it was due to quadruple on 6 August, to an average of 47.6%. Some Chinese companies faced tariffs of 67.9%.

The European Commission decided on a graduated approach in order to encourage Chinese producers to come to a settlement, and also in response to anxiety from EU member states about the effects of a substantial tariff.

The agreement sets a minimum price for Chinese exports of solar panels to the EU, and also a limit on the volume of exports.

Full details of the deal will be available only after it is approved by the 28 European commissioners. However, an official and industry insider said that the minimum price would be €0.56 per watt, and that total exports amounting to greater than 7 gigawatts a year would still be subject to tariffs. In 2012, EU demand for solar panels amounted to about 15 gigawatts. The EU accounts for about three-quarters of the global market.

Written by European Voice. To read the full article, click here.