The EU-China Solar Panel Dispute

Abstract

This chapter examines the EU-China solar panel dispute, the largest trade defense investigation ever done by DG Trade. This chapter first provides background information about the European solar market, European Trade Commissioner Karel de Gucht, and the Option case. This provides useful context to the EU solar panel case. It then assesses which of the BPM, neorealist, or institutionalist models best illuminates the dynamics of issue identification, decision-making, and policy implementation to evaluate existing arguments and cull out scope conditions. I find that, eventually, neorealism explains best what happened concerning decision-making. Institutionalism contributes to a better understanding of all three stages. The Commissioner had an essential role in the issue identification and decision-making stages. The chapter’s conclusion provides a more detailed summary of the case and the theoretical findings drawn from it.

Annex: Specification of the Solar Duties

Commission implementing decision of December 4, 2013 confirmed the acceptance of an undertaking. According to the decision of the Council of Ministers, the following duty rates apply to Chinese solar panel exporters that do not participate in the price undertaking (European Commission 2013d):

• The average duty for exporters that cooperated in the investigation is 47.7%, which is the duty rate applicable to the majority of exporters.

• A duty of 64.9% will be applied to those exporters who did not cooperate in the European Commission’s investigation, which are estimated to account for less than 20% of exports.

As announced by the Commission, the duties comprised an anti-dumping and an anti-subsidy duty of the following rates (European Commission 2013d):

• Definitive anti-dumping duties will range from 27.3 to 64.9% for cooperating parties in the investigation, with a residual anti-dumping duty of 53.4% for non-cooperating companies in the investigation conducted by the Commission.

• Definitive anti-subsidy duties will range from 0% (Delsolar) and 3.5 to 11.5% for cooperating companies in the investigation, with a residual anti-subsidy duty of 11.5% for non-cooperating companies in the Commission’s investigation.

Notes

• 1. A feed-in tariff is a government program designed to promote the uptake of renewable and low-carbon electricity generation technologies. It includes fixed electricity prices for renewable energy producers for each unit of energy produced and injected into the electricity grid.

• 2. Peter Mandelson served as Trade Commissioner from November 22, 2004 until October 3, 2008, and Catherine Ashton from October 3, 2008 until December 1, 2009.

• 3. Dumping is a form of international price discrimination, by which an exporter sells into a foreign market at lower prices than it sells them in its domestic market or sells below its cost price.

• 4. The subsidies “were varied and bestowed” for R&D, manufacturing, installation, or power generation, however contrary to what Western media often stated, the accounts of the investigated firms do not contain marks of financing by the China Development Bank (Plasschaert 2016: 33).

• 5. In May 2013, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) sent a delegation to meet the Commission for a consultation. However, the Commission rejected China’s proposal and did not respond to the questions raised by the CCCME delegation (Ministry of Commerce People’s Republic of China 2013a).

• 6. Per a senior EU official, it was “clearly more than half” (Interview senior EU official, August 11, 2017).

• 7. The case illustrates that global value chains are increasingly changing the balance of interests within “domestic” industries meaning a shift toward buyer-driven dynamics, and paving the way for import-dependent EU companies to mobilize and lobby in favor of a liberal EU trade policy (Eckhardt 2018: 162).

• 8. Over 570 European PV companies representing over 60.000 jobs, with a turnover of €20.9bn in the EU, supported AFASE. Per the Solar Trade Association (STA), it encompassed “8.000 manufacturing jobs” compared to “up to 200.000 jobs” in the wider industry (Solar Power Portal 2013). However, per a senior EU official, this number was “exaggerated,” and the balance of interest was “in favor of the complainants” (Interview senior EU official, August 11, 2017).

• 9. The analysis based on which the Commission concluded that dumping had taken place was not made public (Curran 2015).

• 10. This test means that the Commission will examine whether the potential imposition of measures would be overall more costly to the Union economy than the benefit of the measures would be to the complainants.

• 11. Goron also speaks of rumors reporting lobbying actions vis-à-vis “smaller Central and Eastern Europe Member States” (Goron 2018: 111).

• 12. Or per Pepermans, a combination of attractive COFDI and retaliatory threats convinced 18 of the then 27 EU member states to refrain from supporting the Commission (Pepermans 2017: 1406).

• 13. This “specific European way of handling things” allows Beijing to avoid the WTO Dispute Settlement Mechanism and provides for a middle ground between “the law and procedure-driven EU and China’s preference for negotiations” (Brugier 2017: 210).

• 14. The announcement followed a session of the China-EU Trade and Economic Joint Committee. This included Commerce Minister Gao Hucheng and Commissioner De Gucht.

• 15. In March 2014, ahead of Chinese President Xi Jinping’s visit to Europe, China, and the EU reached an agreement to end the wine dispute, and France, in particular, was eager to see the probe called off.

• 16. All involved actors and press reports concurred that the undertaking was €0.56/watt and the quantity was 7 gigawatts, between 60% and 70% of the expected market size in 2013 (Curran 2015).

• 17. In March 2014, Wacker reached a deal with the Chinese authorities on the probes on EU imports of polysilicon.

• 18. Over the last decades, EU member states have reduced the decision
threshold in the Council to approve proposals of DG Trade to impose
definitive duties (Scharf 2015; see also Gstöhl and De Bièvre 2018).

• 19. Until October 2018, the Commission adopted fifteen Regulations withdrawing the acceptance of the price undertaking (see European Commission 2018b).

• 20. In May 2017, SolarWorld applied for insolvency (PV Magazine 2017). In March 2018, it filed for bankruptcy for the second time.