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. 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.
China responded with its own countermoves, opening an antidumping investigation into polysilicon, the main ingredient used to make solar cells. It also opened a separate probe. Meanwhile, the EU has also opened its own separate probe into State support for Chinese telecoms equipment.
Worried that the trade wars were spiraling out of control, several EU leaders finally sought to end the negative cycle by pressuring both sides to negotiate a settlement to the solar dispute. High-level talks began last month, resulting in the new agreement that will see Chinese manufacturers charge a minimum price roughly equivalent to the spot market price for their solar panels. That price is up to 50 percent more than what some Chinese producers had been charging.