China-EU trade dispute could affect climate change cooperation

Chinese Prime Minister Li Keqiang warning shows risks of solar tariffs on climate talks, argue Chen Jiliang and Bai Yunwen, from the Greenovation:Hub, an NGO based in Beijing

The ongoing trade dispute between the EU and China harms more than just their mutual economic interests – it damages the global development of renewable energy.

During a recent telephone conversation Chinese Prime Minister Li Keqiang told José Barosso, President of the European Commission, that poor handling of the on-going dispute over trade in solar panels could affect overall EU-China cooperation.

The dispute began in September 2012, in response to a complaint made by EU Pro Sun, a Belgium-based association of solar panel manufacturers, that Chinese firms were “dumping” products in Europe – selling them far below their usual market value. The ensuing investigation found that Chinese solar panels were being sold at prices 88% below market value, a situation made possible by Chinese government subsidies for the industry. On June 4, EU trade chief Karel De Gucht announced that 11.8% trade tariffs will be imposed.

In China, the sanctions were immediately labelled a “lose-lose blunder”, while in Germany Philip Rösler (FDP), federal minister of economics and technology, called the decision a “big mistake”. The Chinese government also announced it would launch its own investigation into allegations of EU-subsidies and dumping of wines imported from the EU.

In 2012, a report from Greenovation:Hub, a Chinese environmental NGO, pointed out that anti-dumping rules were originally intended to protect competition – but are instead most often used for protectionist purposes. Action taken against target products from an exporter may also harm domestic consumers, and domestic companies elsewhere in the supply chain. There are complicated links between WTO rules and climate mechanisms – the range and depth of which is again demonstrated by the current spat. Only a comprehensive systemic approach can provide a solution to these issues.

After the Copenhagen climate change talks the EU and China played key roles in forming post-2020 international climate mechanisms. Positive interactions between the two were crucial to progress. But the solar panel dispute will reduce this vital mutual trust and goodwill.

The most important mutual interests for China and the EU are supporting and promoting renewable energy, the optimal allocation of resources, and achieving global climate goals – particularly the rapid roll-out of solar power worldwide. This requires both parties to work together on global climate and trade governance, and to bolster communication and cooperation at the government, business and civil society levels. Only in this way will it be possible to resolve differences and ultimately respond to the urgent and long-term issue of climate change.