Dark Days for Europe Solar or a Silver Lining for the EU ?

Li Keqiang Makes it Rain for Suntech and the Chinese Panel Makers

Europe has backed down to China on trade once again – or has it? A Brussels-based EU trade watchdog had called China out for dumping photo-voltaic panels used in solar power generation – and was poised to enact trade sanctions on Chinese solar panel imports. Germany –the only EU member placing in the global top 5 producer league tables for photovoltaic cell production – led the effort to red-light the sanctions. Premier Li Keqiang and his trade entourage happened to be in Germany at the time, and made no secret about China’s displeasure with the idea of trade sanctions.

It looks like a loss – but was it? You Decide

Ain't no sunshine when Xi subsidizes.
Ain’t no sunshine when Xi subsidizes.

A) It was a humiliating defeat for Europe.
Europe is on the ropes economically, and it should know enough to stick together. The EU has bumped heads with China before – on aircraft emissions, the Dalai Lama, telecom, and even yoghurt – and has chalked up few wins. Not only have the Euros caved in yet again, but they played it wrong at every turn. They bungled the approach by popping-off in the press before they had negotiated internally and gotten their ducks in a row. Germany, the UK and at least 12 other members of the team voted thumbs down on the Brussels actions – effectively allowing China to divide and conquer. Beijing has pulled this move before in Europe – and the Old World keeps falling for it. Merkel and Co. find themselves humiliated and beaten yet again. They have traded away real concessions now in exchange for vague promises about possible future benefits. Once the Chinese establish this kind of pattern, it’s unlikely they’re going to stop it any time soon.

Verdict: The future of the China-Euro partnership looks grim.

B) It was a sublime victory for the Old Masters. Europe still approaches negotiation as an extended act of diplomacy, and it has handled China masterfully at every turn. The EU keeps finding new ways to stay relevant — and to keep Beijing engaged at the highest levels. This was Li Keqiang’s first overseas trip, and Germany was one of four nations to host the new Premier. Europe has been quietly setting China’s international agenda since the beginning of Deng’s great experiment, and it continues to lead the sleepy giant by the nose. The solar panel gambit was just the latest in a series of non-issues that Europe has pulled Chinese leadership into. Even as other major powers (US, Russia)  have begun to dismiss Europe as a failing and irrelevant shadow of its former self, China still finds itself sparring and negotiating with the EU as an equal. Solar panel manufacturing means little to Europe – only Germany has any presence in the industry, and there is much more money (and job-creation) to be found in the design, installation and service aspects of the business. Yet Europe has once again seized both the moral high ground and control of Beijing’s international agenda.

If the final set of press statements so much as alludes to the phrase, “negotiated settlement” then western trade liberals have won a huge victory – essentially making China’s system of implicit trade subsidies (such as low prices for land, water, power and compliance for selected “pillar” industries) part of the international debate from now on. In addition, the ongoing investigations into Huawei and ZTE have been conveniently overlooked. China saves face, Europe gets jobs and investment – and Chinese cyber-strategies are thwarted.

Verdict: It’s VC Day in the Old World.

C) It was a standoff. No winners or losers from this non-issue. Realpolitik has given way to real trade in the waning days of the Eurozone. This was an internecine rock-fight. It was the bankers vs. the bureaucrats as high-minded Brussels tried in vain assert itself over hard-headed Hamburg (and London).

Europe’s financial clout might be failing, but it still has a lot to offer China. Europe can supply the history, culture and brands that wealthy Chinese factory owners and nouveau land barons covet so dearly. Germany, Holland and the rest of Northern Europe (and the UK) are simply playing the hand they were dealt. They know that their future now depends on forging commercial alliances with China. Special relationships with the US carried Europe through the 20th Century, but its role in the new millennium will be as China’s tutor, shopkeeper, chef, couturiere, and banker. The solar panel debate is not the first trade scuffle between the two economic giants, and won’t be the last. They are slowly but surely setting the norms and ground-rules for a relationship what will last at least a generation. The Europeans are at their best when their situation is worst, and they will give Beijing a run for its money. Whatever happens to the EU, it is a safe bet that Germany, France, England and Holland will continue to punch far beyond their weight in Zhongnanhai.

Verdict: Bankers 1, Bureaucrats 0. China didn’t play.

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China Divides Europe in Fight Against Tariffs
By KEITH BRADSHER and MELISSA EDDY
Published: May 28, 2013

http://www.nytimes.com/2013/05/29/business/global/china-divides-eu-in-fight-against-tariffs.html

HONG KONG — Adroitly alternating the threat of a trade war with the lure of its huge import market, China appears to have driven a deep wedge between Germany and the rest of the European Union. And it may even have caused a rift within the German business world.
———————
BBC News:  Half of EU members ‘oppose China solar tariffs’
http://www.bbc.co.uk/news/business-22684663

The UK and Germany are among at least 14 European Union members opposed to punitive tariffs on Chinese solar panel imports, according to diplomats.
The revelation, made on Monday, shows a split among the EU bloc’s 27 members.

———————-
The China-EU Trade Spat  from The Diplomat by James Parker

http://thediplomat.com/pacific-money/2013/05/28/the-china-eu-trade-spat/  

Both Chinese Premier Li Keqiang and German Chancellor Angela Merkel have made statements over the last two days relating to the brewing EU-China trade disputes. Although apparently unrelated, another EU trade probe – this one into controversial (in some economies) telecommunications network equipment makers Huawei and ZTE – is actually addressing very similar underlying issues (implicit Chinese subsidies to its manufacturing sector). In both cases, the role of Germany, the EU’s largest economy, is set to be an important factor in how things proceed.
Merkel promised during statements to the press in Berlin after meeting with Li that Germany would work hard to make sure that “no permanent import duties” would be placed on Chinese solar panels, and that the issue would be cleared up “as quickly as possible.” Premier Li had already voiced his country’s unsurprising “firm opposition” to the two cases whilst on his way to Germany.
Next – Lessons from the Eurunciation of Angela Merkel

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