China, Energy & Environment, Trade defence

Comment: Why EU antidumping duties on Chinese solar panels should be dropped

It is time for the Commission to let antidumping duties and its ‘price undertaking’ on Chinese solar panels expire. The measures do not help the EU achieve it climate goals, argues Christofer Fjellner.

 

The EU is extending its duties on solar panels from China. These antidumping tariffs are not only an example of bad environmental policy. Imposed in 2013 with the intention to solve a problem of trade distortion, they have created a new set of distortions that shift profits to Chinese producers and also risk making European solar panels uncompetitive.

 

It is time for the Commission to let these measures expire. Any other decision will only undermine our climate efforts, the coherence of our trade policy and our efforts to support Europe’s green industry.

 

Antidumping duties should only be applied using strict criteria and sensibly take into account the Union interest. The anti-dumping duties on solar panels are a clear case where there is a strong Union interest on the importing side against such measures, and where the duties actually create more market distortions than they correct.

 

The price undertaking agreed in parallel with Chinese producers is essentially a form of sanctioned cartel: Chinese producers have agreed to sell above a secret minimum price negotiated with the Commission. The increased cost for European consumers inflates the profits made by solar panel producers in China.

 

The solar panel duties imposed by the EU are the largest protectionist measure in Europe today. Solar panels represent roughly half of the total value of all EU imports affected by trade defence instruments. This is not just a highly questionable use of the EU’s trade defence instruments. I believe the duties are harmful as such.

 

There is an inherent conflict in every antidumping case between consumers and downstream companies importing on one side and upstream producers being protected by a duty on the other. A majority of jobs in the European solar sector is found downstream, in the business segment of the sector with over 80 percent of the value added. It is likely that the duties have led to a net loss in jobs in Europe.

 

It has been said that when two producers meet, they will conspire against the consumer. The undertaking has resulted exactly in that. Chinese producers increase their profits and the few remaining European producers are sheltered from competition – all to the detriment of consumers and downstream producers.

 

Sanctioning a Chinese cartel

 

Still, there is hardly a consensus among upstream producers that the duties serve their interest. The initial complainants of the alleged Chinese dumping account for a minority of European producers. This is not surprising as the minimum import price distorts all incentives to develop better and more efficient solar panels in Europe. Chinese producers now compete in developing high quality solar panels as the price for the European market is de facto fixed by a minimum price. The long-term effect is that European producers are losing any competitive edge that they might have had before the introduction of duties. Furthermore, all incentives for European solar panel producers to be cost-efficient is gone.

 

These measures are also harmful environmental policy. EU ambitions to tackle climate change after the COP 21 agreement in Paris requires to further reduce emissions of greenhouse gases: this must be done in a cost-efficient manner. Making the transition to renewable energy more costly will damage the legitimacy and popular support for our environmental ambitions. The deployment of solar panels is growing exponentially, and prices on world markets are decreasing. We should welcome cheaper green technology that can help us meet our ambitious climate and energy objectives. That is nothing we should fear but rather make use of and speed up our transition to less carbon-intensive energy production.

 

For the sake of our jobs, our consumers and our environment, the duties on solar panels should be removed. The duties were introduced to create a level playing field and fair international competition between solar panel producers, but they have not solved the problem. In fact, they have created larger distortions than the ones they were intended to solve.

 

The Commission has made up its mind but I now expect member states to take the Union interest into account and oppose the renewal of the duties. Only that way can we have credibility in our ambitions and policies for openness to trade and fighting climate change in an effective and cost-efficient manner.

 

Credit: P Knutson

Christofer Fjellner is a Swedish MEP (EPP) and a regular columnist at Borderlex

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