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High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article.The EU and China have settled a trade fight over solar panels that upset relations between two of the world’s largest economies and threatened to spread to other industries in a spiral of tit-for-tat retaliation.

EU Solar energy equipments/Photo:the

The settlement – known as a price undertaking – is on terms favorable to Beijing. It will allow Chinese companies to export to the EU up to 7 gigawatts per year of solar products without paying duties, provided that the price is no less than 56 cents per watt.

High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article.

Any products sold above the quota or below that minimum price will be hit with anti-dumping duties rising to an average of 47 per cent from August 6.

The minimum price – the most contentious issue in the negotiations – is in line with recent averages for Chinese producers. It is well below the 80 cents or more the European solar manufacturers that filed the original complaint had deemed reasonable, based on the provisional findings of an anti-dumping investigation by the European Commission.

As details of the settlement leaked out this week, a spokesman for those manufacturers, known collectively as EUProSun, threatened to challenge the settlement in court.

Karel De Gucht, the trade commissioner, welcomed the settlement, which required nearly two months of often intense negotiations.

“We are confident that this price undertaking will stabilise the European solar panel market and will remove the injury that the dumping practices have caused to the European industry,” Mr De Gucht said. “We have found an amicable solution that will result in a new equilibrium on the European solar panel market at a sustainable price level.”

EU officials have defended the settlement by noting that prices have collapsed in the European solar industry since the beginning of the investigative period in mid-2011. As such, they argued, what seemed like a reasonable minimum price then may not be today – or going forward.

Mr De Gucht’s hand was also weakened in dramatic fashion two months ago when a majority of EU governments – led by Germany – signalled their opposition to provisional duties.

The settlement is expected to last until the end of 2015. About 90 Chinese solar manufacturers have signed up to it. Those that do not will be forced to pay the full duties.

The solar case was the EU’s largest ever trade investigation, based on more than €20bn in solar products that Chinese companies shipped to the EU in 2011.

We are confident that this price undertaking will stabilise the European solar panel market– Karel De Gucht, EU trade commissioner

The commission took up the case at the behest of a group of manufacturers, led by Germany’s SolarWorld, after Chinese competitors grew in just a few years from bit players to capturing about 80 per cent of the EU market – the world’s largest.

The case has served as an unintended contest of wills between a rising China and a crisis-hit EU.

It has also sparked fears of a wider trade war, with Beijing launching its own investigation into imported European wine and polysilicon and threatening another against European luxury cars.

It is believed that those related cases will not be closed as part of the solar settlement, according to an EU diplomat, frustrating one of Brussels’ demands.

Meanwhile, the EU will also continue a separate investigation in to possible illegal subsidies granted by Beijing to its solar manufacturers. Beijing had been hoping to close that case as part of a settlement to avoid any potentially damaging disclosures, according to EU officials.

Even though the solar case has been resolved, the EU and China are still facing trade tensions. Mr De Gucht has been threatening to launch an investigation into Chinese-made telecommunications network equipment that is arguably even more incendiary.

While some trade lawyers believe the solar settlement reveals a weakened EU trade commissioner, others believe it will now free his hand to pursue the telecoms case.