Deutsche Bank Research

Germany sides with China in solar trade dispute with EU

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On June 5 the European Commission is likely to impose anti-dumping duties of some 47% for six months on Chinese solar imports into the EU in response to a request by the shattered EU solar panel industry. Due to opposition from Germany and other EU members, the measure will be for six months, with a decision on full five-year punitive tariffs left for the European Council next December. Chinese solar panels have a market share of 65% globally and 80% in the EU.

The anti-dumping case (which, incidentally, comes very late in the solar industry crisis) has emerged as a test of whether the EU can maintain a unified trade policy or whether a united front of national governments will ultimately fracture under intense commercial lobbying by Beijing. Germany’s decision, shared by more than a dozen other member states, to side with Beijing reflects a very differentiated view of the case within Germany itself as well as the deepening political ties between China and Germany and their growing economic interdependence. As European demand remains weak, the ability of export-oriented EU companies to sell their products in China helps protect jobs at home. Germany and China’s economic ties are based on a simple trade-off: technology for markets. German companies have entered into joint ventures with Chinese partners and agreed to technology transfers. In return, they have enjoyed strong Chinese demand for German luxury cars and high-tech machinery – including for production of solar cells and panels. China is the largest single market for German carmakers and one of biggest markets for major companies from several other industries. Nurturing this special economic and political relationship requires a balancing act, however. China’s strategy to boost selected sectors by granting direct and indirect subsidies to its producers may lead to further trade conflicts in the future.

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Published with kind permission of Deutsche Bank Research.

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