A dispute over solar panels may be sparking a minor trade war between Europe and China. The EU’s trade commissioner is proposing a 40 percent levy on cheap Chinese solar panels in a bid to save Europe’s struggling domestic production. The Financial Times reports:
[One struggling German solar panel producer] contended that Chinese competitors used illegal government subsidies, including cheap financing, to undercut it on pricing and take over more than 80 per cent of the EU solar market, the world’s largest.
However, the plan to impose duties has drawn frantic opposition from other elements of the European solar industry, which have benefited from inexpensive Chinese products. The many small companies that install panels on roofs and homes and Wacker Chemical, a key supplier of polysilicon, the main ingredient in photovoltaic cells, have warned that higher duties will hurt the industry and cost more European jobs than they save.
European industry seems split over the issue. On the one hand, consumers and suppliers of auxiliary solar products (the kinds of products China isn’t selling) are thrilled that solar panels are so cheap. But European panel producers are calling foul, arguing that Beijing is effectively cheating by offering massive government subsidies to its producers.
These subsidies aren’t just bad for European production. China’s solar industry is going bankrupt because its government financed a massive oversupply of solar panels. Chinese suppliers were banking on Europe’s growing demand and bargain-basement prices to turn this mess around. If Europe isn’t willing to play ball, there’s little hope that China’s solar industry can stave off implosion.
The solar industry has one serious problem: If it isn’t subsidized, it doesn’t work. As it is, neither the Chinese nor the Europeans have figured out how to build a healthy market. Instead of propping up the industry with government subsidies and tariffs, countries should invest in research and development aimed at getting solar panel efficiency up and bringing costs down.