Case study 15.2: The EU- China Solar Power anti-dumping dispute
In the final quarter of 2012, the EU launched two separate investigations into Chinese exports
to the EU of solar panels and their key components - wafers and cells - after complaints by
the European industry (notably, the German manufacture - SolarWorld) that China was
dumping these products onto the European market with the support of government subsidies.
In international trade, dumping is defined as exporting at a lower price than is charged in the
producer’s domestic market or at a price that is below the cost of production. The strategic
intent is to use these price incentives to capture market share, to undermine indigenous
suppliers and to raise market prices thereafter. This particular dumping allegation occurred
against a background of a glut for solar panels in 2011 with the result that the global supply
of panels grew intensely competitive. The European complaint followed on the heels of a US
action which had resulted in the imposition of anti-dumping tariffs of 249.96 per cent and
other duties – countervailing duties – of up to 15.97 per cent.
The costs associated with solar power have fallen substantially due to increased
manufacturing capacity, aggressive cost cutting and the pursuit of economies of scale and
there can be no disputing the scale and efficiency of the Chinese solar power industry which
has led to sharp price reductions and the increasing affordability of this technology for the
mass market of consumers. Since 2000, solar power technology prices have fallen
consistently and have reduced by as much as 60 per cent (most notably since 2011). The price
of Chinese solar technology exports has fallen by as much as 75 per cent between 2009 and
2012 with the result that in less than a decade since entering the market in 2004, Chinese
manufacturers controlled as much as 50 per cent of the market. Such capacity renders China
both the largest manufacturer and exporter of this product. In 2011, the value of Chinese
exports of solar power equipment to the EU was in excess of €20 bn.
Given the US precedent, it came as little surprise that the EU found evidence of dumping and
of injury to EU manufacturers as a result of this process. The EU investigation found that
Chinese prices were on average 88 per cent below fair value. The evidence of a causal link
between dumping and injury legitimised to the EU the imposition of EU anti-dumping duties
to prevent further injury. These duties were set at between 37.3 per cent and 67.9 per cent.
The anti-dumping advisory committee (which consists of representatives of all states and to
whom the EU makes recommendations) was deeply divided on the issue with 18 voting
against the measure, five abstaining and only four voting for it. Nonetheless, the Commission
decided to proceed with provisional duties. As of August 2013, targeted anti-dumping duties
were imposed on Chinese solar technology with the actual rate dependent upon the
manufacturer but the average tariff was 47.7 per cent. These duties were to be applied up to
the beginning of December when they would be made permanent where a negotiated
settlement proved elusive. However should a majority of states oppose their imposition they
would not be applied. In practice, state resistance diminished and China negotiated
undertakings with the Commission to make the definitive measures less punitive. The
definitive measures were to be applied for two years. Alongside these negotiations, Chinese
manufacturers agreed to a number of measures that meant that, by the end of the transition
period, 75 per cent of Chinese solar panel exports were not subject to any punitive duties. The
negotiations with 90 of the main Chinese exporters (which accounted for 60 per cent of the
EU market) led to agreement on a minimum price for solar panels. For these companies, the
anti-dumping duties were to be waived so long as they adhered to the price agreement. This
price agreement was also supported by an annual volume supply ceiling (which covered 75
per cent of exports). If this ceiling were breached, then duties would apply at the rate of 47.7
per cent. The rate for the 50 companies that did not co-operate was 64.9 per cent. These
duties comprised an anti-dumping and an anti-subsidy element with the former ranging
between 27.3 and 64.9 per cent and the latter between 3.5 and 11.5 per cent.
Agreement on the imposition of the duties was by no means unanimous with opposition
coming from some member states and from parts of European industry. EU equipment
retailers felt that the process would lead to higher installation prices as 70 per cent of all EU
panels were imported. This could have a negative effect on both employment and the
deployment of this technology across Europe, especially at a time when many states were
either reducing or totally eliminating solar power subsidies. This latter point is seen as
especially important given the green agenda within the EU where low prices from China have
been a key factor driving the growth of solar power across the EU. Germany was especially
vocal in its resistance to these measures for fear that it could stimulate retaliation. Indeed as a
direct response to the duties, China opened up anti-dumping investigation into European
manufacturers of poly-silicon.
Case questions
1. Does this anti-dumping case undermine the EU’s strategy for renewable energy?
2. Identify the main stakeholders and their interests in the case.
3. How do you establish whether dumping has taken place?