Report International trade

Beijing sows discord among Europeans

Yet again, Europe brings its split ranks to the negotiating table. Yet again, Berlin wants to lead with a project different from what the European core wants, and yet again, China will be the winner.

Published on 29 May 2013 at 12:19

China is defying the European Union. It is testing the ability of the 27 member states to maintain the only common policy that actually exists – the trade policy. Europe exists on the international scene as a unique entity in one capacity only – trade. Will the Europeans throw in the towel on this issue also?

The stakes are high. The struggle is over a sector – photovoltaic panels – that is crucial to the industries of the future. The European Union Trade Commissioner, Belgium's Karel De Gucht, suspects Chinese suppliers in that sector of massive price dumping. He proposes to impose, by June 5, a temporary 47 per cent customs tax on Chinese solar panels. He wants to protect European suppliers in this sector. Some 25,000 jobs are allegedly threatened by the unfair trade practices of the Chinese competition.

Mr De Gucht is a courageous man. His case is solid. A lawyer by profession, the commissioner is simply following in the footsteps of the United States. This spring, weary of confronting subsidised competition, the United States imposed tariffs of between 31 per cent and 250 per cent on imported Chinese solar panels.

Industry in decline

The case is not as simple as it seems. In Europe, the solar panel industry is already largely on the decline. Those who have the upper hand are those European firms that install the solar systems. Their interest lies in having cheap panels available – in short, from China.

Receive the best of European journalism straight to your inbox every Thursday

This explains, in part, the opposition of some 17 EU members to Mr De Gucht's plan of attack. The opposition is led by Germany, whose third largest trade partner is China. Two-thirds of Germany's trade surplus is generated outside of Europe, notably in Asia and more particularly in China.

Avoiding a trade war

Berlin does not want a trade war with Beijing, at any price. Exporters on the other side of the Rhine fear losing the Chinese market. For them, that market counts more than European Unity. During a meeting with her Chinese counterpart, Li Keqiang, German Chancellor Angela Merkel rejected the tax proposed by Brussels and suggested a negotiation with Beijing.

Some of the arguments of the European opposition to Mr De Gucht's initiative are undoubtedly admissible. But the method is absurd and counterproductive. From this perspective, Ms Merkel's example is catastrophic because the Chinese like nothing better than to see the "Barbarians" split ranks. In trade relations, as with other issues, China knows how to exploit European disunity. It has the means to put pressure on Germany so that Berlin will drag the rest of the EU along.

The correct strategy, for Europe as a whole, would have been to publically endorse Mr De Gucht's initiative in order to arrive at negotiations with China in a position of force. In short, act like the United States, and not, yet again, like the Care Bears of international trade.

View from Germany

Free-trade deal is better than sanctions

By imposing heavy custom duties on Chinese solar panels, "the EU is reining-in the energy transition," says German daily Tageszeitung.

This blow could result in a strong backlash because it is Chinese suppliers that made the solar energy boom possible. [...] It is important to remember that the price of solar energy is lower today than it has ever been. Just a few years ago, the price of a kilowatt hour was €0.40 today it is below €0.20.

Apart from a group of German solar panel manufacturers, who asked for sanctions against China, German entrepreneurs do not fear imports of cheap Chinese solar panels, adds Tageszeitung. On the contrary, the proposal of a free-trade agreement between China and Germany made, on May 26, by Chinese Prime Minister Li Keqiang during his visit to Berlin, "raised great interest for the German economy".

By simply removing customs tariffs, German exports to China could rise by at least €4bn.

Tags

Was this article useful? If so we are delighted!

It is freely available because we believe that the right to free and independent information is essential for democracy. But this right is not guaranteed forever, and independence comes at a cost. We need your support in order to continue publishing independent, multilingual news for all Europeans.

Discover our subscription offers and their exclusive benefits and become a member of our community now!

Are you a news organisation, a business, an association or a foundation? Check out our bespoke editorial and translation services.

Support independent European journalism

European democracy needs independent media. Join our community!

On the same topic