Europe and China Agree to Settle Solar Panel Fight

BRUSSELS — The European Union's trade chief said on Saturday that a

deal had been reached with China to settle a dispute over exports of

low-cost solar panels that had threatened to set off a wider trade war

between two of the world's largest economies.

The settlement essentially involves setting a fairly high minimum

price for sales of Chinese-made solar panels in the European Union to

try to prevent them from undercutting European producers. Those

producers accused Chinese manufacturers of benefiting from enormous

loans from state-owned banks and other government assistance that

enabled them to charge prices that would otherwise be uneconomical.



"We have found an amicable solution that will result in a new

equilibrium on the European solar panel market at a sustainable price

level," Karel De Gucht, the European trade commissioner, said in a

statement.



The deal immediately met with ferocious criticism from the European

manufacturers that had filed the complaint, and it complicates a

similar dispute between the United States and China.



Mr. De Gucht's decision in June to carry out his threat to impose

tariffs on solar panels from China generated significant fears within

the union about retribution from China. Chancellor Angela Merkel of

Germany called for further negotiations to avoid harm to German

exporters. European importers of solar products from China also

opposed the tariffs.



At the time, Mr. De Gucht said he had been left with no choice but to

impose the tariffs since his investigators found a systematic effort

by Chinese companies to sell solar panels in Europe below the cost of

making them, a practice known as dumping.



On Saturday, officials at the European Commission said they could not

give details of the deal, including the price that Chinese exporters

would pay to sell their panels in Europe, until the arrangement had

been formally approved by the commission. But a European Union

official, who spoke on condition of anonymity because the deal had not

yet been formally approved, said the two sides had agreed to a minimum

price of 0.56 euros per watt (74 cents), which would base any

potential surcharge on the amount of electricity generated by each

imported panel.



The European solar manufacturers who lobbied for tougher action

against the Chinese exporters on Saturday promised to sue over the

settlement.



The agreement "is contrary in every respect to European law," said

Milan Nitzschke, the president of EU ProSun, an industry group. A

minimum price of 0.55 to 0.57 euros was at the level of "the current

dumping price for Chinese modules," the group said in a statement.



The arrangement would cover exports from 90 of about 140 Chinese

exporters that were examined during the investigation, and that

represent 60 percent of the panels sold in Europe, the government

official said. Those 90 companies would no longer face tariffs that

were put in place in June. Chinese exporters that did not agree to the

terms will still face tariffs that are set to rise to 47.6 percent on

Aug. 6 from the current level of 11.8 percent, the official said.



The Chinese government hoped from the start of the trade case with the

European Union for a negotiated settlement instead of a legal battle.

This deal comes as a relief, said He Weiwen, the co-director of the

China-United States-European Union Study Center at the China

Association of International Trade in Beijing.



The European settlement with Beijing in some ways complicates a

similar dispute between the United States and China. The United States

Commerce Department imposed final anti-dumping and anti-subsidy

tariffs last spring on imports of solar panels from China. China

responded on July 18 that it was preparing to impose tariffs of more

than 50 percent on polysilicon, the main material for solar panels, on

imports from the United States and South Korea.



The United States began trying in early summer to arrange a

comprehensive deal among Beijing, Brussels and Washington that would

set new global trade arrangements for solar panels in exchange for the

removal of the American tariffs and the preliminary European tariffs.

But faced with a complex process in the United States for removing

tariffs once the Commerce Department has made them final, the European

Union pushed ahead with its own negotiations with China, a Senate aide

with detailed knowledge of the issue said on Friday.



"The administration has been doing the right thing on this, pushing

for talks and trying to get a joint settlement with Europe, but the

Europeans have not had the same attitude and instead are pursuing

talks with China independently of the U.S., which has stalled progress

on U.S.-China talks," said the aide, who spoke anonymously because of

the diplomatic sensitivity of the issue.



The Office of the United States Trade Representative, which is part of

the White House, had no immediate response to the European deal, which

was announced shortly before dawn in Washington.



Solar panels represent more than 6 percent of China's exports to the

Continent, making them one of the largest Chinese exports to the

European Union. In 2011, Chinese exports of panels and their main

components to the European Union were worth about 21 billion euros or

$27.4 billion.



China grew from a tiny player in the global solar panel market five

years ago to the world's dominant producer now through a program of

enormous lending by state-owned banks and a wide variety of

manufacturing incentives by local and provincial governments. That has

allowed Chinese producers to drive down the price of panels by

three-quarters over the same period.



But Chinese manufacturers have expanded faster than the market, and

the largest of them now face severe financial difficulties.



James Kanter reported from Brussels and Keith Bradsher from Hong Kong.

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