EU faces tough decision on China solar panels

The European Commission faces a difficult choice Wednesday -- stick to its principles and impose anti-dumping duties on Chinese solar panel imports, or bow to German-led pressure and avoid a step many believe risks a full-scale trade war with Beijing. The stakes are high, commercially and politically. On the one hand, EU-China trade is worth more than 500 billion euros annually, a powerful incentive for everyone to keep calm at a time when both sides, and especially the 27-member EU, are looking to trade to boost growth and jobs. On the other, the Commission, the EU's executive arm, is caught between Germany, the bloc's paymaster and biggest economy which has come out openly against duties, and France, which favours them as a way of showing that the bloc will stand up to Beijing in trade disputes. Analysts say the Commission is in an uncomfortable place. "The Commission, given the significant and public divisions among member states, is in a very weak position," said consultant Sergio Marchi, a former Canadian trade minister and ambassador to the World Trade Organization. "It will probably seek an elegant way to save face but I'm not sure there is such a route," Marchi said, adding: "I think the Commission will need to swallow its pride on this one!" The Commission, however, does have some limited leeway. The tariffs to be announced Wednesday will be provisional, lasting six months, and so still allow room for negotiations with all parties. A final decision would come only in December, when EU member states would have to vote to make them permanent or not. May has already been a busy month and China upped the ante again Friday when it added an anti-dumping probe into EU chemical exports to an investigation of seamless pipes. These moves were set against the Commission's probe on solar panels and a possible examination of Chinese telecoms. German Economy Minister Philipp Roesler said on Monday there was "no longer a need for penalties", a remark all the more pointed for being made in the presence of visiting Chinese Premier Li Keqiang. "We are against protectionist measures, (we are) for open markets and fair competition," Roesler said while Li commented: "This position, that is what binds China with Germany and earns my appreciation." EU sources say Germany has mustered 17 other member states against the tariffs just as France insisted they were justified and that far from harming ties with China, would actually put them on a more even keel. "We will have the chance to tell our Chinese partners that we wish to broadly refashion trade between China and the European Union, including in renewable energy," said French Ecology and Energy Minister Delphine Batho, adding that "the rules of international trade must be applied." For his part, EU Trade Commissioner Karel De Gucht, who has to make the decision on Wednesday, bluntly warned member states to be wary of China trying to influence the outcome. De Gucht told visiting Chinese Vice Minister of Commerce Zhong Shan that "he was ready to negotiate a solution on the solar panels case," according to a spokesman. But De Gucht also said he was aware of the pressure exerted by China on EU member states and was more than ready to resist it. "It is the role of the European Commission to remain independent, to resist any external pressure and to see the 'big picture' for the benefit of Europe, its companies and workers based upon the evidence alone," he insisted Monday. "China has become the 28th member state of the EU," commented Daniel Cohn-Bendit, co-leader of the Greens in the European Parliament. "It influences the decision in 18 countries and it knows how to position itself." Meanwhile at the sharp end of the dispute, EU companies in China were hoping against any turn for the worse. "Who would not be concerned?" Davide Cucino, president of the European Union Chamber of Commerce said of the prospects of a trade war. "We urge that both sides engage in friendly negotiations to reach any possible, amicable solutions to the issue." But "(we have) to see if the economic pressure on Iran bears fruit," he said, adding that "there are still chances that Khamenei could be more flexible because of the pressure".