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EU duties on Chinese solar panels losing member-state support

Employees examine newly-made solar panels before boxing for shipment at a factory of Yingli Solar in Baoding, Hebei province August 2, 2012.
Employees examine newly-made solar panels before boxing for shipment at a factory of Yingli Solar in Baoding, Hebei province August 2, 2012.

By Robin Emmott and Ethan Bilby

BRUSSELS (Reuters) - A majority of EU governments oppose a plan to impose hefty duties on solar panel imports from China, a survey of member states showed on Monday, undermining efforts by Brussels to pressure Beijing over its trade practices.

The European Commission, the EU's executive, accuses Chinese firms of selling solar panels at below cost in Europe - a practice known as "dumping" - and plans to impose duties, making it far harder for China to gain market share.

The duties, averaging 47 percent, will come into force from June 6 for a trial period and could be withdrawn if both sides reach a negotiated settlement.

It is the largest trade case the Commission has undertaken, with about 21 billion euros of China-made solar panels sold in the EU.

The duties are being proposed by the EU's trade commissioner, Belgian lawyer Karel De Gucht, who met with Chinese Vice-Minister of Commerce Zhong Shan for an informal meeting in Brussels on Monday.

The Chinese side described the meetings as "constructive" and said the pair discussed solar duties as well as an EU threat to open an investigation into mobile telecom equipment makers Huawei and ZTE.

But Zhong said that either EU move would lead to a definitive Chinese response.

"Such practices of trade protectionism are not acceptable to China," a spokeswoman for the Chinese mission to the European Union said in a statement, and would "seriously sour the climate on bilateral trade and economic engagement."

"The Chinese government would not sit on the sidelines, but would rather take necessary steps to defend its national interest," if the EU went ahead, the statement said.

The fear of Chinese reprisal and potential loss of business has led Germany, Britain and the Netherlands to be among at least 14 member states to oppose the sanctions, diplomats told Reuters.

The Commission said China was pressuring some EU countries to oppose the duties.

"Commissioner De Gucht ... made it very clear to the Vice-Minister that he was aware of the pressure being exerted by China on a number of EU member states, which explains why they are positioning themselves as they are in their advisory positions towards the European Commission," the Commission said in a statement.

The EU's 27 countries had until last Friday to submit a formal, written response to De Gucht's plans. While the trade commissioner would still have the right to impose the duties, doing so in the face of member states' opposition would be hard.

The Commission statement said De Gucht told China's vice-minister he wanted "to examine the possibility of a negotiated settlement in partnership with the United States should this become necessary."

Provisional duties will more than likely still go ahead on June 6, once they are published in the European Union's official journal, officials say, but the pressure to roll them back before they become permanent in December will be intense.

The split underlines the depth of division in the EU over how to deal with China, a critical market for many EU exporters and the region's second biggest trading partner over all.

Reuters spoke to 21 of the EU's 27 countries and confirmed that 15 opposed the duties, while six supported them. The other six either declined to say or were unreachable.

France and Italy are leading a group of countries that say De Gucht is right to go ahead with sanctions, arguing that China's rapid rise in solar panel output to more than the world's entire demand could not have happened without illegal state support.

Chinese companies have captured more than 80 percent of the European market from almost zero a few years ago.

De Gucht met China's deputy commerce minister for informal talks in Brussels on Monday, a day after Chinese Premier Li Keqiang and German Chancellor Angela Merkel, meeting in Berlin, called for an end to the dispute, as well as another conflict over Chinese telecoms companies accused of dumping in Europe.

Germany initially supported De Gucht's plans for duties, and it was a German company, Solar World, that first raised the complaint against the Chinese.

But rather than punitive measures, Merkel now appears to favor a negotiated solution, wary of the potential impact on German exporters if China were to take retaliatory steps.

"There is no need for more sanction measures," German Economy Minister Philipp Roesler told a news conference on Monday after talks with Li.

TRADE CHIEF'S STRATEGY

Although De Gucht says he had no intention of damaging European business interests in China, he wants to show Beijing that the Commission is serious about preventing dumping and that China must play by international trade rules.

France shares that view.

"We want to see a balanced relationship between China and the European Union," said French Industry Minister Arnaud Montebourg. "Countries that use protectionism, and China is one of them, should accept reciprocal rules," he told reporters.

EU officials told Reuters earlier this year they were frustrated with the Chinese leadership's lack of engagement.

By levying provisional duties, the Commission feels it has leverage, because under EU law the sanctions could be cemented for up to five years from December if no solution is found.

According to a copy of the Commission's solar investigation obtained by Reuters, the Commission found clear evidence of dumping by Chinese producers.

"The Commission was presented with prima facie evidence that dumping occurred. They can't just ignore that," said Stuart Newman, a legal adviser to the Foreign Trade Association, a lobby group based in Brussels.

(Reporting by Luke Baker, Ethan Bilby, Robin Emmott, Francesco Guarascio and Phil Blenkinsop in Brussels, Yann Le Guernigou in Paris and Andreas Rinke in Berlin; Editing by Mike Collett-White, Will Waterman and Peter Cooney)

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