Europe and China Agree to Settle Solar Panel Fight

BRUSSELS — The European Union's trade chief said on Saturday that a
deal had been reached with China to settle a dispute over exports of
low-cost solar panels that had threatened to set off a wider trade war
between two of the world's largest economies.
The settlement essentially involves setting a fairly high minimum
price for sales of Chinese-made solar panels in the European Union to
try to prevent them from undercutting European producers. Those
producers accused Chinese manufacturers of benefiting from enormous
loans from state-owned banks and other government assistance that
enabled them to charge prices that would otherwise be uneconomical.

"We have found an amicable solution that will result in a new
equilibrium on the European solar panel market at a sustainable price
level," Karel De Gucht, the European trade commissioner, said in a
statement.

The deal immediately met with ferocious criticism from the European
manufacturers that had filed the complaint, and it complicates a
similar dispute between the United States and China.

Mr. De Gucht's decision in June to carry out his threat to impose
tariffs on solar panels from China generated significant fears within
the union about retribution from China. Chancellor Angela Merkel of
Germany called for further negotiations to avoid harm to German
exporters. European importers of solar products from China also
opposed the tariffs.

At the time, Mr. De Gucht said he had been left with no choice but to
impose the tariffs since his investigators found a systematic effort
by Chinese companies to sell solar panels in Europe below the cost of
making them, a practice known as dumping.

On Saturday, officials at the European Commission said they could not
give details of the deal, including the price that Chinese exporters
would pay to sell their panels in Europe, until the arrangement had
been formally approved by the commission. But a European Union
official, who spoke on condition of anonymity because the deal had not
yet been formally approved, said the two sides had agreed to a minimum
price of 0.56 euros per watt (74 cents), which would base any
potential surcharge on the amount of electricity generated by each
imported panel.

The European solar manufacturers who lobbied for tougher action
against the Chinese exporters on Saturday promised to sue over the
settlement.

The agreement "is contrary in every respect to European law," said
Milan Nitzschke, the president of EU ProSun, an industry group. A
minimum price of 0.55 to 0.57 euros was at the level of "the current
dumping price for Chinese modules," the group said in a statement.

The arrangement would cover exports from 90 of about 140 Chinese
exporters that were examined during the investigation, and that
represent 60 percent of the panels sold in Europe, the government
official said. Those 90 companies would no longer face tariffs that
were put in place in June. Chinese exporters that did not agree to the
terms will still face tariffs that are set to rise to 47.6 percent on
Aug. 6 from the current level of 11.8 percent, the official said.

The Chinese government hoped from the start of the trade case with the
European Union for a negotiated settlement instead of a legal battle.
This deal comes as a relief, said He Weiwen, the co-director of the
China-United States-European Union Study Center at the China
Association of International Trade in Beijing.

The European settlement with Beijing in some ways complicates a
similar dispute between the United States and China. The United States
Commerce Department imposed final anti-dumping and anti-subsidy
tariffs last spring on imports of solar panels from China. China
responded on July 18 that it was preparing to impose tariffs of more
than 50 percent on polysilicon, the main material for solar panels, on
imports from the United States and South Korea.

The United States began trying in early summer to arrange a
comprehensive deal among Beijing, Brussels and Washington that would
set new global trade arrangements for solar panels in exchange for the
removal of the American tariffs and the preliminary European tariffs.
But faced with a complex process in the United States for removing
tariffs once the Commerce Department has made them final, the European
Union pushed ahead with its own negotiations with China, a Senate aide
with detailed knowledge of the issue said on Friday.

"The administration has been doing the right thing on this, pushing
for talks and trying to get a joint settlement with Europe, but the
Europeans have not had the same attitude and instead are pursuing
talks with China independently of the U.S., which has stalled progress
on U.S.-China talks," said the aide, who spoke anonymously because of
the diplomatic sensitivity of the issue.

The Office of the United States Trade Representative, which is part of
the White House, had no immediate response to the European deal, which
was announced shortly before dawn in Washington.

Solar panels represent more than 6 percent of China's exports to the
Continent, making them one of the largest Chinese exports to the
European Union. In 2011, Chinese exports of panels and their main
components to the European Union were worth about 21 billion euros or
$27.4 billion.

China grew from a tiny player in the global solar panel market five
years ago to the world's dominant producer now through a program of
enormous lending by state-owned banks and a wide variety of
manufacturing incentives by local and provincial governments. That has
allowed Chinese producers to drive down the price of panels by
three-quarters over the same period.

But Chinese manufacturers have expanded faster than the market, and
the largest of them now face severe financial difficulties.

James Kanter reported from Brussels and Keith Bradsher from Hong Kong.
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