Germany Fires Shot In China-EU Trade War … At Brussels

The solar-panel industry, once fattened by taxpayer subsidies and false hopes, has been in a death spiral around the world. In the US, a slew of photovoltaic standouts like Solyndra went under, taking billions of subsidies and investor capital with them. In Germany, it has been just as brutal. Even large companies are licking their wounds.

Bosch Solar Energy AG will shut down production early next year, after having burned through €2.4 billion; 3,000 jobs are at risk. Siemens is trying to shed its solar units, if it can find a buyer. Victims of Chinese companies that flooded world markets with cheap solar panels. But even Chinese companies are going bankrupt, including one of the big four, Wuxi Suntech, subsidiary of US-listed Suntech Power.

Companies in the US and Europe complained about these cheap imports, and anti-dumping proceedings were initiated. In Europe, it started last summer. And last week, reports surfaced that the European Commission was ready to act. On June 5th, if no solution materialized, the Commission would slap Chinese-made solar panels, cells, and wafers with punitive import duties of on average 47%.

It was part of the Commission’s campaign to defend the sacred European soil against cheap imports of all kinds – despite the EU’s widening trade surplus (€22.9 billion in March). It has already initiated 31 trade investigations, 18 against China alone. Last week, the Commission fired another shot, launching an investigation into anti-competitive behavior by Chinese telecom equipment makers Huawei and ZTE, China’s high-tech crown jewels. But the 47% punitive duties on solar panels were the harshest measure yet in the trade war, hitting €21 billion worth of Chinese imports.

China accused the EU of protectionism. It “would seriously harm China-Europe trade relations,” Ministry of Commerce spokesman Shen Danyang said at a news conference. “Provoking trade friction with China” would be like “dropping a boulder on one’s own foot”; it certainly wouldn’t help Europe escape from its economic crisis, he said ominously.

Even Greek Prime Minister Antonis Samaras, who happened to be in Beijing, was drawn into the fray when Chinese Premier Li Keqiang asked him to stop the EU’s protectionist attacks.

While Samaras may not be much of a factor, Germany is. And it has been lining up the big guns. But they’re not directed at China, though German solar-panel makers suffered perhaps the most from Chinese competition. They were effectively silenced by Germany Inc., which is now furiously firing round after round – at Brussels.

On Sunday, it was German Economy Minister Philipp Rösler, who warned of a trade war with China and lambasted the European Commission for its decision to start an anti-dumping procedure against Chinese telecom equipment makers. A “grave mistake,” he called it. And punitive duties against Chinese solar makers where “the wrong instrument,” he said. “The German industry is deeply worried, and rightly so.” The Commission must do “everything” to prevent an escalation of the trade war. It “must rely on a negotiated solution and dialogue, not on threats,” he said.

Even pretexts are good, for example when Anton Börner, president of the Federation of German Wholesale, Foreign Trade and Services (BGA), claimed to be worried about thousands of jobs in the industry of PV panel installers, which might be pushed out of existence by higher panel prices. But Germany Inc. isn’t worried about panel installers. It’s worried about exports!

Börner acknowledge that: German equipment manufacturers whose technologies are used in the production of solar panels in China would be harmed. And he was worried about a further escalation and broadening of the trade war. “Other industries must now tremble,” he said.

Ulrich Grillo, president of the Federation of German Industries (BDI), admonished the Commission to exhaust “all options to find a negotiated solution” before launching anti-dumping cases against China. “German industry with its high proportion of exports is dependent on open markets.”

That’s the European dilemma. With many countries mired in recession, and some sinking into depression-like conditions, the Commission wants to protect certain industries. While it can’t protect Spanish companies from German competition, it can protect them from Chinese competition. Given how much German solar-panel makers have suffered under Chinese pressure, and how many billions in subsidies and investments have gone up in smoke, the Commission might have counted on German support.

But for Germany Inc., China is one of the two big economic engines that are still pulling. Exports to the Eurozone, particularly to top trade partner France, have stalled, and the industry is looking to China for growth. Chinese money is also flowing into Germany as Chinese companies are on a shopping spree, paying top euros for 98 firms in 2012, including Putzmeister, a world brand for concrete pumps. Germany Inc. sees in China an escape route from the economic mayhem of the Eurozone; it sees a booming market with over twice the population of the EU. For Germany Inc., China is the future – and Europe a drag. One more treacherous rift across Europe.

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