The internal politics of EU’s trade defence: institutions and interests
In September 2012, the European Commission announced the launch of an anti-dumping (AD) investigation into solar photovoltaic cells, wafers and modules imported from China. The case covered a trade value estimated at €21 billion in 2011, or roughly 4.8% of Chinese exports to the EU. It was thus ‘the most significant anti-dumping complaint the European Commission had ever received’ (EC 2012a). Investigations into countervailing duties (CVD) soon followed.
International tensions had been escalating since 2009 (Lewis 2014) and the United States (US) was already on the verge of imposing high-level tariffs against Chinese solar products.Footnote 4 The company that led the campaign against Chinese solar PV in the US, the German manufacturer SolarWorld, formed a coalition of 6 PV producers, ‘EU-Prosun’, to demand parallel protection in the EU. In response, the Alliance for Affordable Solar Energy (AFASE) was formed to oppose the tariffs. By the end of 2013 AFASE gathered over 800 European companies, some of them with ties to Chinese companies (Curran 2015; Kolk and Curran 2017).Footnote 5 These two competing coalitions represented different segments of the PV production chain. EU-Prosun represented manufacturers of solar wafers, cells and modules, while AFASE was a coalition of upstream producers (polysilicon and equipment exported to China) and downstream retailers and installers of PV projects. The European Photovoltaic Industry Association (EPIA), which had members on each side, refrained from taking side until the dispute was settled. However, by the time that the Commission had to decide whether or not to renew its tariff policy in 2015, it did take more clearly position against the tariffs that, according to its judgement, hurt the development of the PV industry in Europe (EPIA 2015).
Besides industrial interests, the political actors involved in the dispute were also divided. According to the EU's trade defence rules, the European Commission, as the executive agency of the EU Common Trade Policy, was in charge of conducting the investigations and propose remedies. But then, it had to convince the Council of Ministers representing the EU Member States to adopt the final AD and CVD remedies.Footnote 6 As often in TDI cases, the Member States were divided internally and vis a vis the Commission’s position. Whether contingent or ideologically motivated (Evenett and Vermulst 2005; Nordström 2011; Bollen 2016),Footnote 7 the divisions sparked by the Solar Panel dispute were very salient and critically observed by the Chinese.Footnote 8 Some governments opposed the tariffs from the outset. Importantly, Germany’s Chancellor Angela Merkel announced in August 2012 that she wanted to solve the dispute politically, even though the main claimant Solarworld was a German company.Footnote 9 The Swedish and UK governments also publicly opposed the tariffs. However, France, Spain, Italy and Portugal initially favoured protection. At the same time, the European Parliament, which only had a consultative role, held a couple of debates in which Members (MEPs) called for a strong defence of the EU’s PV industry.Footnote 10 For the Chinese, these divisions demonstrated the partiality of trade defence instruments lending support for the Chinese government’s stern opposition to the tariffs.Footnote 11
From the point of view of the Commission, the involvement of the Member States was perceived as a weakness just awaiting Beijing’s exploitation. In response, it portrayed its role as ‘to ensure independence and work on behalf of everyone across Europe by seeing the “big picture”’ (De Gucht 2013b). However, very different perspectives prevailed in many national capitals, where, as a commentator put it “the geopolitical relationship [with China] has become almost too important to national capitals to entrust to the commission” (Chaffin 2013).
Tracing environmental arguments in the dispute
The strategic importance of China and divergent economic interests were not the only reasons for which the Commission’s claim to act on EU’s behalf was challenged. From the outset, the Commission’s action was contested because the tariffs were aimed at increasing the price of PV panels on the EU market, at a time when a core objective of climate policy was to make them competitive against fossil fuels and affordable to a majority of citizens. Indeed, the probe came against a backdrop of growing concerns about trade rules becoming barriers to meaningful action to combat climate change (Klein 2014; Lewis 2014). The unease in the Commission was evidenced by its unusual public statement within days after launching the probe, where it claimed that ‘the EU’s investigations into solar panel imports from China does not harm Europe’s climate goals’ (EC 2012b). This section provides an overview of how the dispute unfolded, and the main steps are summarized in Table 1.
In reaction, the Chinese government immediately announced a probe into European (mainly German) imports of polysilicon, which it used to manufacture the contested cells and panels.Footnote 12 Soon, it also brought an action against Italian and Greek renewable feed-in-tariff policies at the WTO. These actions significantly broadened the scope of the trade dispute for EU member states, while also pressing the EU on the issue at the core of the dispute: the subsidization of low carbon technologies development by the state (see below).Footnote 13
The issue of the sustainability of the energy transition also had a crucial employment dimension. Both the EU and China have repeatedly emphasized that the Energy transition is about growth and jobs. Yet, while EU-Prosun claimed that Chinese dumping threatened 25,000 industrial jobs (EU-Prosun 2012), a Prognos study commissioned by AFASE in 2013 claimed that the tariffs could cost up to 218,000 jobs in the renewable energy sector (Prognos 2013). Nonetheless, in March 2013 the Commission imposed the registration of solar PV imports from China, which was interpreted as a signal that it would impose tariffs. The Commission concomitantly launched a probe into Chinese imports of solar glass. During his visit to Europe immediately after this imposition, Chinese Premier Li Keqiang and Chancellor Merkel jointly criticized the Commission’s action and reiterated their resolve to settle the dispute politically.
The position of the Commission became increasingly contested within Europe, notably by a group of environmental NGOs, who denounced this ‘rude and fully undeserved action’ as ‘the last thing that Europe needed to address climate change’ (WWF et al. 2013). But the tug of war nonetheless kept escalating. Trade Commissioner Karel De Gucht announced his intention to launch and ex officio probe (without official industry complaint) into Chinese telecom services (De Gucht 2013a) and attempts to negotiate by a delegation of Chinese industries in May, ahead of the release of the Commission’s AD investigations findings, were rejected.Footnote 14 When the Commission announced in June that it had found ample evidence of dumping from the Chinese exporters and proposed to impose provisional duties between 37.3 and 67.9%, only 4 Member States voted in favour, while 18 voted against and five abstained (Choudhury 2013; Shi 2013).
However, Trade Commissioner De Gucht, to show his determination, decided to use his legal prerogative and impose the provisional duties.Footnote 15 Some governments reacted strongly against this unilateral action, even though De Gucht claimed that he was acting to protect the Member States who feared retaliation from China (Chaffin 2013). Remarkably, the British Energy Minister Greg Barker made a special trip to Brussels to vent his government’s anger at a move, which, according to him, hurt the British PV sector (exports of manufacturing machinery to China and downstream PV installers). The German Chamber of Industry called for a swift ending of the ‘trade war’ after over a thousand PV companies petitioned the EU Commission not to impose tariffs,Footnote 16 and the Swedish Board of Trade published a report entitled ‘Targeting the Environment’, where it denounced the negative consequences of the Commission’s trade defence practice for climate policy.
China retaliated, as it had warned, by opening a probe into European wines (especially French).Footnote 17 It made clear that if the EU really went ahead with high tariffs against the Chinese industry, it would not go undamaged.Footnote 18 Concerns began to mount within the EU that the Commission’s strategy to pressure the Chinese authorities would spill out of control and cause long damage to the bilateral relation (Martin 2013). By mid-July, even more Member States seemed inclined to vote against the final measures scheduled in December.Footnote 19 Meanwhile, the Commission granted a temporary discount at 11.8%, until the official publication of AD duties on 6 August, to help facilitate the negotiations of a deal with the Chinese PV industries. This decision was immediately challenged (though unsuccessfully) by EU-Prosun, who denounced a “manifest error of assessment of the facts” by the Commission and a “serious violation of its duty of care and good administration”.Footnote 20
The de-escalation process started with the negotiation of an amiable “price undertaking”Footnote 21 following two weeks of negotiations in Beijing in July 2013. The negotiated settlement received almost unanimous support by the Member States, even though the minimum import price agreed was substantially lower than what the Commission initially proposed (Solar Server 2013).Footnote 22 The Chinese accepted the deal, instead of gambling on a better outcome when the Member States’ final vote came in December.Footnote 23 Commissioner De Gucht justified the decision in the light of the global nature of the PV industry (De Gucht 2013c). But EU-Prosun was enraged by what it denounced as a “dumped price” (EU-Prosun 2013). It brought a series of (thus far unsuccessful) judicial actions, denouncing a lack of due process and transparency in the negotiation of the price undertaking and the fact that it was, according to them, “manifestly inadequate” to remove the injury to EU producers.Footnote 24
The political ‘détente’ nevertheless continued throughout the autumn. The Commission decided to follow the usual practice under the ‘lesser duty rule’Footnote 25 of subsuming CVD tariffs duties under the price agreement, even though Commissioner De Gucht would have preferred to forego this practice in cases involving what he called ‘capitalist states’ like China (De Gucht 2013d). The EU-China annual summit on 19–21 November, themed “Green Growth”, celebrated the diplomatic victory, resumed bilateral high-level trade dialogue, which had been suspended for 3 years, and even launched the negotiations of a bilateral investment treaty (Xinhua 2013a, b; Van Rompuy 2013). Finally, the official adoption of AD and CVD measures in December eliminated wafers from the scope of the probe and reduced the length of the measures to 2 years instead of the normal five, because of the ‘volatility in the sector’ (the very rapid decrease in global PV prices).Footnote 26 The Commission abandoned the threatened probe into Chinese telecoms (EC 2014), while the Chinese probes into German polysilicon and French wine rapidly found settlements.Footnote 27 Beijing did not press further on its WTO actions against European feed-in-tariffs policies and quietly accepted the EU imposition of double AD and AS tariffs on its exports of solar PV glass.
In short, although direct actions by the Chinese government did enrage some European governments, overall it fails to fully explain why Europeans were so publicly divided and why the Commission changed its position so radically. Disagreements on the impact of AD and CVD on Europe’s green growth goals, including whether fighting China was the appropriate strategy to achieve them, contributed to ‘outflank’ the trade Commissioner (Chaffin 2013). This sets the solar panels dispute apart from the many other trade disputes with China.Footnote 28