China is pushing hard for only limited restrictions on its solar panel exports to the European Union, complicating talks aimed at avoiding hefty tariffs on Chinese firms and a possible trade war, a document obtained by Reuters showed on Tuesday. The European Commission, the EU's executive, accuses China of flooding Europe with billions of euros of cheap solar panels sold at below the cost of production, and has imposed duties that will jump up to punitive levels on August 6.
Brussels and Beijing have until then to find a solution to their biggest ever trade dispute and said earlier this month they were moving towards a deal, in a test of whether the two trading partners can overcome their differences. But a Commission document dated July 12 said China wants any solar agreement to expire by the end of 2014, that the so-called wafers that make up the panels should be excluded from tariffs and that any cap on Chinese exports should be negligible.
The document described Beijing's requests as "difficult to implement" because the Commission wants to curtail the dominance of Chinese companies that have captured more than 80 percent of the European market from almost zero a few years ago. European anti-dumping duties also normally apply for up to five years. Commission trade spokesman John Clancy declined to comment specifically on the document, but said that negotiations continue at the highest level to find a solution.
A Chinese source familiar with the negotiations also denied media reports that the talks had broken down, saying Chinese negotiators were still in Brussels and would continue discussions with the Commission this week. "I believe both sides still have keen interest in continuing the negotiation and having a final agreement at last. They have negotiated for so long, and the two sides cannot bear the costs if it breaks down," the source said. China's mission to the EU declined to comment.
Failure to reach a deal before August 6, when tariffs jump to 47.6 percent, will effectively lock China out of the European solar market, the world's largest which accounted for half the global market last year, according to research firm IHS. Chinese solar manufacturers including Trina Solar, Yingli Green Energy and Suntech Power Holdings exported 21 billion euros ($27.4 billion) worth of solar panels, cells and wafers to the EU in 2012. It would also worsen already tense trade relations. Beijing is deciding whether to levy its own duties on imported European solar-grade polysilicon, a raw material used in solar panel production. China also began an investigation this month into whether Europe is selling wine in China below cost, something the EU denies.
The Commission's offer boils down to setting a minimum import price for Chinese solar panels based on the most competitive level in the international market and allowing Chinese companies to meet about 60 percent of EU consumption. Under the proposed deal, China could sell solar panels in Europe at around 0.55 euros per watt, which compares with Chinese prices today that are as low as 0.38 euros. "The Commission would be ready to accept such a price," the document said. "The Commission believes that a lower price is not acceptable." The average price of German solar panels on the international spot market was 0.78 euros per watt in May, according to solar price index pvXchange.
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