Friday 8 March 2013

The EU Chinese PV Anti-dumping Investigation

What you Need to Know

News this week that imports of Chinese solar PV into Europe is subject to registration has brought the investigation into Chinese alleged anti-competitive practices back into the spotlight. How might it affect the solar industry in Europe?

What is Dumping?

Dumping sounds bad, doesn’t it?  Like a bloke in a battered truck is going to pull up outside your house and lob a couple of used tyres, a tatty old pram and a carrier bag full of dog poo into your front garden.

Plenty more where this came from
In international trade, dumping is defined as charging a lower price in an export market than is charged in the home country of the producer.  It is seen as an anti-competitive strategy aimed at driving competitors in the export market out of business in an attempt to create a monopoly.

Governments are allowed under international trade rules to protect their domestic producers against such predatory pricing.  To do so they must prove that the pricing is below “normal value” and that the practice is causing damage to the domestic industry in the importing country.

The Chinese Problem

China poses a special problem for proving that the products are being sold below normal value.  Neither the USA nor the EU considers China to be a market economy.  The price for a product in China is therefore not accepted as a fair market value.

The investigators may chose to determine the normal value of the product by looking at the price in a third country.

What Happened to Chinese Solar PV in the US?

In November 2012 the International Trade Commission (ITC) of the USA upheld the ruling of the Department of Commerce that Chinese exporters of solar photovoltaic cells and panels were both receiving subsidy from the Chinese government and dumping their products into the US at below normal value.  The subsidy was assessed to be around 15% and the dumping margin around 25%.  The ITC concluded that this had damaged the business of US-based solar manufacturers.

The news was not all bad for Chinese exporters though, because a loophole was left open – solar panels made in China from solar cells manufactured in other countries are exempt from the duty.  Many Chinese panel manufacturers have simply moved cell production outside of China.

What’s Happening in the EU?

The process in the EU is similar to the US, but with one difference.  In addition to finding that products have been dumped into EU markets at below normal value, and that EU industry has been harmed, the Commission also assesses whether the imposition of duties would be against the wider interests of the EU.

The investigation was launched in September 2012, and will report preliminary findings by June 2013 and conclusions by December 2013.  A provisional level of duty can be applied to imports in the period between June and December. 

In the meantime, from March, all imports of Chinese PV must be registered.  This allows the EU to apply duty retrospectively to solar PV imports between this date and the date of the preliminary findings.  This so-called "retro-active duty" is only allowed only if there is a further substantial rise in imports –  a rush to import before the imposition of any duties.

So what’s the Most Likely Outcome?


It seems likely that when faced with the same evidence as was presented in the USA, the European Commission will reach the same conclusion, that Chinese PV manufacturers have been receiving state subsidies such as preferential lending terms, tax exemption, and cheap materials, power and land.  This support has allowed them to dump solar panels into Europe at below cost.


The second test would be whether the Chinese exports had damaged the European industry.  Prosun, the group bringing the action against Chinese exporters lists 34 European solar PV manufacturers that have become insolvent since 2010, 25 of which closed in 2012.  My guess is that there will be no question that Chinese competition has damaged European manufacturers.

The final test is whether the imposition of import duties would be against the interest of the European Union, and this is where it gets interesting.  There’s no question that lower prices for PV modules is of benefit to customers, and is also allowing member states to meet their renewable energy targets at lower cost - at least in the short term.  Solar trade bodies and installation companies fear that more expensive solar PV panels will result in a loss of demand for their services and are dead set against anti dumping tariffs.  They have organized around a group called the Alliance for Affordable Solar Energy.

Their argument is persuasive – so what if the Chinese want to subsidize European solar installations – why not let them?  A clue to the thinking at the European Commission is on a fact sheet that has been published on the case:

“Potentially unfair trade in solar panels does not help the environment: a market that faces dumped imports will drive local producers out of business and could discourage EU producers from developing cutting edge technologies in the renewable energy sector. As well as the very significant loss of jobs, dumping and other unfair trade practices can ultimately lead to less competition and eventually price increases. We do not know yet if that is the case here, but that's what the investigation is designed to find out.”

I’m not a betting man, but if you forced me to come off the fence, I’d probably guess that the price of solar PV in the European Union is set to rise.  What do you think?