PV solar trade dispute continues between the European Union and China: publication of a notice of initiation of anti-subsidy proceeding

The European Commission adopted on 8 November 2012 a notice of initiation of an anti-subsidy proceeding related to solar panel and related key components imports from China (published in OJ C 340 of 8.11.2012, p.13). China is the world's leader manufacturer of solar panels (around 65%), 80% of the Chinese production being allegedly exported to the EU market (approx. 21 billion Euros).

The notice of initiation opens officially the phase of investigation of the case by the European Commission. The latter has assessed that there was enough convincing elements in the complaint brought on 26 September 2012 by the EU industry association ProSun to initiative an investigation pursuant to Article 10 of Council Regulation (EC) No 597/2009 of 11 June 2009 on protection against subsidised imports from countries not members of the European Commission (so-called "basic Regulation"). An anti-dumping investigation has been launched on 6 September 2012 in the same case based on a complaint lodged on 25 July 2012 by the same complainant (MEMO/12/647) than in the present case.

The products concerned by the investigation are crystalline silicon photovoltaix modules or panels and cells and wafers of the type used in crystalline silicon PV modules or panels (see pt. 2 of the Notice of initiation).

Nature of the allegations

ProSun alleged that some solar panel products have been subsidised by the Chinese government to such an extend that their import into the European Union have increased substantially both in overall absolute terms and in terms of market share. The European Commission found enough grounds in the prima facie evidence provided by ProSun as regards the negative effects that the alleged subsidies have had on the level of prices charges by the EU industry.

The Chinese government is suspected of having subsidised the products under investigation through, "inter alia":

- preferential lending to the solar panel industry (ex: credits or low-interest policy loans)

- grant programmes (through funds and research and demonstration programmes)

- government provision of goods for less than adequate remuneration (by providing favourable financial access to materials and services such as polysilicon, aluminium elements, electricity, land, glass, etc.)

- direct tax exemption and reduction programmes

- indirect tax and import tariff programmes (ex: VAT exemptions)

It is common, in particular in the renewables sector, that such products receive financial support in various ways. What is a concern for international trade is the "unfair" nature of the subsidy. Government subsidies may result in distortion of competition, by making subsidised goods artificially competitive through lower prices. Competitors will therefore be enable to compete on equal terms.

The European anti-subsidy legislation is based on the 1994 WTO agreement concerning "unfair trade practice".

Next steps

The European  Commission has qualified the case as "the most significant anti-subsidy complaint the European Commission has received so far" (MEMO/12/844). The Commission underlined the trade volumes involved by underlying that China exported PV panels and related components for a volume of approximately 21 million Euros in 2011.

The investigation period is scheduled to last 13 months. After a first phase of investigation and consultations (until 5 August 2013), the Commission will already be able to issue its provisional findings (reality of the distortion and link of causality between the injury allegedly suffered by the European PV industry and the Chinese measures. The Commission can then adopt provisional countervailing duties, continue the investigation without imposing duties or close the case. The two investigations, anti-subsidies and anti-dumping, should be closed approximately simultaneously.

This is not an isolated case at the international level. See for instance a previous note on investigations launched by the US government on the same products in May 2012 (available here). But China has also taken the offensive and lodged a complaint with the WTO against several subsidies from EU Member States (Greece, Italy) for illegal support of solar panel producers. Chinese authorities threatened to raise tariffs on raw materials used for PV panels production, namely polysilicon.