The EU finds little comfort in retreat from a brutal battle over solar panels.
While living in Shanghai I had the opportunity to try out paintball. The leader of my team had learned about tactics and movement at a very serious military school in the US. During one battle I blundered into a dangerous situation and retreated to take cover. At the next break, he took me aside and reprimanded my action. “It’s more dangerous moving backwards. You stand just as much chance of being hit, but you are giving up position. Always move forward.”
European business leaders take note. While Brussels may think that they have made a gentlemanly compromise in backing away from punitive tariffs against Chinese solar panel exporters, Beijing obviously sees it differently. Not only is China investigating EU wine dumping practices, but the PRC is actually amping up solar panel subsidies to compensate for Europe’s symbolic 11.8% tariff.
Lessons from the China-EU solar panel deal.
- Negotiate to win or keep your mouth shut. A warning shot across the bow is a Western tradition. The Chinese probe for weakness. Westerners posture, Chinese mobilize.Once they start, there’s no stopping them.
- Your most important China negotiation takes place at home. Don’t show weakness or dissension. A united front is your most important advantage. Brussels may have been too quick to speak publically about potential trade sanctions, but Germany was too quick to throw the EU under the bus.
- Go with the flow. The Euros could have found alternatives to manage Chinese “race to the bottom” solar pricing. There were ways to profitably and proactively handle this situation, such as quality standards and distribution requirements. The real money in the solar energy business is in service, installation and design. When dealing with China, it is better to channel the flow of trade – not try to hold back the tide.
- Beware the linkages. China had leverage from other things – such as Europe bound investment and access to Chinese markets. When you negotiate with the Chinese government, you have to take into account a wider range of variables than you do when working with private enterprises. Chinese negotiators like asymmetrical and “bolt from the blue” responses. Be ready.
- Learn to profit from weak positions. Beijing was once great at this, but as Chinese start throwing their weight around it’s time for smart Western negotiators to take a page from their book. Westerners associate strong, aggressive positions with negotiating success and victory. That’s great work if you can get it, but when dealing with Chinese counter-parties you may find it’s better to be nimble, creative – and just a bit passive-aggressive.
As the US economy strengthens and the EU continues to have trouble, China will start displaying different behaviors on either side of the Atlantic. Listen for the notes that China doesn’t play after the Xi-Obama sit-down this week. Although the US has taken a similar posture towards Chinese trade to that of the EU, it is likely that Beijing will put a much more positive spin on Xi’s California visit.
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