It’s really amazing to watch the negotiations between China and the European Union over solar panels as the two sides try to avert a trade war. Similar to what happened between the U.S. and China last year, EU panel makers are arguing that Chinese solar manufacturers are dumping panels below cost on the European market, a market Chinese makers already own 80 percent of.
What the negotiations are now coming down to is a fight over minimum pricing. The Wall Street Journal reports:
The EU was offering to set the minimum price close to the current international price of between €0.50 and €0.60 a watt of solar-panel capacity. But now about five cents appear to be separating the Europeans and the Chinese.
So we’ve got a fight over setting the minimum price, which I should step back and say is probably an anathema to dyed in the wool free market capitalists. But what’s even funnier here is that the starting minimum price was actually €1.10 a watt, but EU officials soon realized that the market had moved so quickly since it had done its analysis, which must have looked at 2012 data, that it had to revise downward. The global price of solar panels had dropped so drastically. The EU wants to allot 60 percent of the EU market to Chinese panel makers which seems bizarre and intrusive, and is really just a way of saying to China that it has to cede market share.
The core reality is that China probably does engage in export subsidies, as it has done in many markets. But the EU’s carving up of the market and heavy handed intervention doesn’t seem like the answer either.