China-EU Solar Panel Row Could Become Explosive, Say IMD Professors: MBA News

Two professors at Switzerland's IMD business school have warned that even if the current China-EU dispute over alleged Chinese subsidy of solar panels within Europe dissipates, potential global trade ramifications could be huge.

 

"The EU-China solar panel dispute could conceivably fizzle out. Alternatively, it could escalate into a major trade conflict between two of the world's three economic giants," say Carlos A Primo Braga and Jean-Pierre Lehmann in a jointly penned blog post on IMD business school's website. "Obviously one hopes for the former, as a Sino-European commercial war could be extremely nasty with quite devastating effects not only for the two parties concerned, but globally."

 

The EU imposed sanctions on Chinese solar panels on June 6th, in reaction to accusations of a perceived unfair advantage due to state subsidy. News agency Reuters reports that "the European Commission, the EU executive, accuses Beijing of dumping billions of euros of solar panels at below the cost of production, unfairly winning 80 percent of the EU market."

 

In reaction to this, China has since announced it will investigate the alleged subsidy of European wine within China. This move has been widely seen as a warning to France and Italy, strong supporters of the EU's Chinese solar panel clampdown, while many other EU member countries have distanced themselves.

"Even the fizzle-out scenario, however, could prove to be just a temporarily doused fuse in an explosive powder-keg," warn Braga and Lehmann, who are director and founder, respectively, of IMD's The Evian Group, a think tank focussed on aiding business and society to benefit from economic globalization.

 

"If solar cells don't trigger a trade conflict between the EU and China, something else will at some stage given the inexorable confrontational trend," the two professors at IMD continue.

 

"After all, the substantial trade flows involved in this dispute (around €21 billion, the largest anti-dumping complaint ever) and the perception that the West is taking an increasingly aggressive stance in response to Chinese trade expansion (by engaging in preferential agreements that discriminate against China and adopting targeted trade remedies) do not bode well for 'peace' on the trade front."