August 6, 2021

China Divides European Union in Fight Against Tariffs

HONG KONG — Adroitly alternating between threats of a trade war and promises of increased purchases of imports, China’s leaders appear to have succeeded in driving a deep wedge between Germany and the rest of the European Union.

For half a century, Germany has been one of the most loyal and enthusiastic supporters of making the European Union ever larger in geographic terms and ever more ambitious in the scope of issues that it handles. But with Chinese and European Union trade officials trying to stare each other down in the world’s largest anti-dumping and anti-subsidy case ever, Germany has weighed in on China’s side.

Germany’s economics minister, Philipp Rösler, said Monday that Germany had told the European Commission in Brussels that it was voting against the imposition of preliminary tariffs on the $27 billion worth of solar panels that China sells to Europe each year. While the European Commission routinely consults member countries on preliminary tariffs, this has tended to be more of a formality in the past, and opposition to them has been infrequent.

But on Tuesday, a trade official in Europe with direct knowledge of the matter said it appeared that a majority of European governments were officially opposed to preliminary tariffs on Chinese solar imports. Speaking on condition of anonymity because the details were not yet public, the trade official noted that despite such opposition, Brussels would be able to go ahead with imposing preliminary tariffs because the national governments play only an advisory role at the preliminary stage.

The preliminary tariffs last only six months and have tended to be a negotiating ploy aimed at securing a compromise before the Commission must decide whether to impose so-called final tariffs that last for five years. But if Germany is confirmed to have rallied enough other countries to oppose the tariffs — Britain has already indicated sympathy with Germany on the issue — then it could take away the negotiating tool.

Chancellor Angela Merkel of Germany had vowed to lobby against the tariffs, telling reporters Sunday after meeting with Prime Minister Li Keqiang of China that the situation with the European Commission was “rather complicated.”

“Germany will do everything possible to resolve the conflicts that we have in trade, for example in solar industry or the telecoms industry, through as many discussions as possible to prevent it from falling into a sort of conflict that ends in the raising of tariffs from both sides,” Ms. Merkel said.

German companies, many of which rely more heavily than other European companies on China as a key market for their exports, have feared the dispute over solar panels could lead to an all-out trade war with China, which would be disastrous for their businesses.

Mr. Li is clearly aware of the power of the largest economy within the European economic bloc. Germany was the only E.U. member country Mr. Li visited during his first tour to Europe since taking office in March, spending three days in Berlin before heading to Brussels.

During his visit, Mr. Li said China was willing to offer preferential treatment to German investors in its fast-growing logistics, education and health care sectors.

“China and Germany have a shared position of opposition to trade protectionism, and we have expectations that Germany will play an active role and promote a resolution of the frictions through dialogue and consultation between the European Union and China,” Mr. Li said.

Zhong Shan, China’s vice minister of commerce and chief international trade representative, issued a strong warning to Brussels late Monday after his latest trade talks there with European officials failed to produce a deal.

If the European Union proceeded with anti-dumping duties on solar panels, “the Chinese government would not sit on the sideline, but would rather take necessary steps to defend its national interest,” Mr. Zhong said in a statement.

“Despite the heightened risk of the China-E.U. bilateral trade disputes widening and escalating, the Chinese government would nevertheless make a best effort for hope of reaching a consensus and avoiding a trade war, but this would require restraint and cooperation on the E.U.’s part,” he said.

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