Escalating Trade Disputes for Chinese-made Solar Panels
China has become the world's largest producer of solar panels, and the European Union has become the largest consumer of solar panels. Due to the economic climate within Europe, it is natural for them to bolster their own solar industry in the interest of keeping and adding employment and growth. However, China which is Europe's largest supplier has been accusing the EU of protectionist actions which go against the rules of the World Trade Organization. China's primary complaint centers on Rome and Athens, where a new policy allows for higher electricity prices to solar companies which use locally sourced components.
Solar panels made in China have become a major flashpoint in growing trade disputes among the world's largest trading blocs: China, Japan, the US, and the EU. Many governments are criticizing China for dumping their devalued solar panels in their countries and destroying their solar industries.
It goes without saying that the cost of doing business has historically been lower in China, which decreases the prices of their manufactured goods. But adding on top of that is the fact that China maintained their high level of production during the economic downturn several years ago, despite a sharp drop in demand. The resulting massive oversupply of solar panels were then put on the market, badly hurting foreign solar industries. The Chinese solar panels were dumped at a discount of 30 percent.
The move within the EU by Italy and Greece is not alone. The US government in Washington is also under pressure to raise tariffs on Chinese goods. Particularly during this election season, candidates have talked about protecting domestic industry from Chinese goods. The US congress has recently sanctioned restriction on goods it deems have been dumped by China.
In response, China has issued a series of complaints to the WTO for the actions in the EU and US. According to the Chinese Ministry of Commerce spokesman, "The Chinese government has the right and the responsibility to fight for a fair international trade environment for China's solar industry," adding that all countries should reject short-term protectionist measures.
The trade disputes will hopefully be resolved between the parties. However, if no agreement is reached within 60 days, the WTO will be asked to adjudicate.
This is just the recent flashpoint in a long simmering dispute between the EU and China, but the EU is definitely not a solar panel customer that China wants to lose. About 60 percent of China's solar panel and component exports go to EU countries, accounting for 7 percent of all exports to that region. Earlier this year, an official complaint was submitted by the EU, backed by its major solar producers led by Germany's SolarWorld.
To read the official complaint, click here.
Solar Panel image via Shutterstock