Europe may levy anti-dumping tariffs on China-made solar products. This will increase the prices of China-made solar products in Europe. To retaliate, China will likely impose tariffs on Europe-based polysilicon through its on-going anti-dumping investigation into US-, South Korea-, and Europe-based polysilicon makers. According to UK-based media, The Telegraph, most EU state members oppose the punitive tariff that may be as high as 67%. According to the report, countries such as Germany, the UK, and The Netherlands oppose the trade war because the countries are fearful of losing business in China.
The magnitude of reaction since the announcement that the EU anti-dumping tariff rate may be in the range of 47-67% has been strong compared to the reaction to the US punitive tariff rate. The reason is because the EU anti-dumping tariff may be levied on China-made solar modules. China is the biggest solar module exporter. The EU punitive tariff will hurt China-based firms where it hurts the most. According to Forbes, China sold about US$21 billion worth of solar panels and components to the EU market in 2012. Despite the strong growth of installations among emerging markets, Europe remains the largest solar market in the world. Also, many Europe-based solar firms exited the market in recent years; hence China-based firms have been dominating the market. Some believe it is because of the low price solar modules provided by China-based firms, coupled with lucrative incentives that allow solar installations to soar in Europe. Supporters of the tariff believe that it is precisely due to the low price solar modules that have put Europe-based solar firms out of business.
The solar market is still in its infancy in many countries and it is understandable for governments to protect domestic firms.
China has been known for providing hefty subsidies to nurture infant industries and solar is one of them. The subsidies, coupled with cheap labor, allow China-based solar firms to produce products using low costs and expand capacity rapidly. It is very difficult for firms from other countries to compete.
The possible punitive tariff may just be a way for Europe to get China to sit down for a trade talk. According to UPI.com, officials from China have arrived in Brussels to begin the trade talk on May 27, 2013. The trade talk will include the recent trade dispute over solar panels and wireless telecom equipment.
