EU, China Solar Talks Fall Apart: What’s Next?

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Doug Young

Trade War
Trade War. photo via Bigstock

It’s been interesting to watch all the different interpretations coming out of a brief flurry of talks in Europe late last week aimed at settling a trade dispute between the EU and China over Beijing’s support for its solar panel makers. About the only thing that everyone agrees on is that some talks did happen, and that China took the interesting step of letting an industry association rather than government officials handle its side of the negotiations. But after that, no one seems to agree on why exactly the talks fell apart or whether there’s hope that they might be restarted before the EU finalizes proposed punitive tariffs on imported Chinese solar panels. Adding further intrigue to the mix, German Chancellor Angela Merkel has come out during a meeting with visiting Chinese Premier Li Keqiang to say that Germany opposes punitive tariffs and wants to see the dispute resolved before a trade war begins.

I have to commend Merkel for breaking with the EU trade commission to try and find a constructive solution to the dispute, since a trade war isn’t in anyone’s interest and could deal a serious blow to this important sector. But that said, it’s far from clear that China’s inexperienced negotiator will be able to work constructively to find a solution to this impasse, which stems from western allegations that Chinese solar panel makers receive unfair state support.

The current state of confusion has its origins in remarks last week by an official from the Chinese Chamber of Commerce for Import and Export of Machinery and Electronic Products, a government-backed industry group that was chosen to represent Chinese solar panel makers in talks with the EU. After the talks broke down, the frustrated official returned to Beijing where he said his group had made an offer that had been rejected by the EU’s trade office. (English article)

That prompted an EU to quickly fire back to call the Chinese statement misleading because formal talks had yet to be launched. An EU spokesman further added that the meeting last week was only “technical preparatory talks”, and that formal negotiations could only begin after the EU commission considering the case publishes its preliminary findings.

Clearly there are some communication problems here, which I blame on both sides. For his part, the Chinese representative probably has little or no experience negotiating in this kind of major trade dispute, and simply thought he could make a quick offer and settle the matter. The EU, meanwhile, failed to realize the Chinese negotiators lacked understanding of the EU’s process for settling this kind of talks. If they wanted to handle the situation better, the EU negotiators should have realized they would be dealing with a relatively inexperienced Chinese team and made more effort to educate them about the EU’s dispute resolution process.

Merkel’s entry into the situation seems a bit unusual, since individual EU leaders seldom speak out on this kind of dispute and usually let the bloc’s trade representative handle such matters. (English article) As I said before, I’m happy to see such a major national leader finally speaking out on the need to negotiated solutions in these kinds of disputes rather than conducting investigations and unilaterally imposing punitive tariffs.

Merkel’s words and China’s willingness to finally admit there is a problem and seek a negotiated solution both look like good signs that both sides want to resolve the matter and perhaps a trade war can be averted; accordingly, I’d put the chances of success for a negotiated settlement relatively high, perhaps at about 70 percent.

Bottom line: Despite some confusion, talks to resolve the EU-China dispute over solar panels should have a good chance of success due to both sides’ desire to avert a trade war.

Doug Young has lived and worked in China for 15 years, much of that as a journalist for Reuters writing about Chinese companies. He currently lives in Shanghai where he teaches financial journalism at Fudan University. He writes daily on his blog, Young´s China Business Blog, commenting on the latest developments at Chinese companies listed in the US, China and Hong Kong. He is also author of a new book about the media in China, The Party Line: How The Media Dictates Public Opinion in Modern China.

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