China, EU strike deal on trade in polysilicon

Move comes ahead of President Xi's 4-nation trip to Europe this month

China and the European Union announced on Thursday they have settled a trade dispute over polysilicon products just ahead of President Xi Jinping's four-nation trip to Europe.

The Ministry of Commerce and German polysilicon producer Wacker Chemie AG said that an agreement has been reached to settle the long-standing dispute through a price undertaking.

The agreement means European exports of polysilicon will not be sold below a specific minimum price in China, while China agrees to refrain from imposing anti-dumping and anti-subsidy duties on the imports.

China's anti-dumping and anti-subsidy investigations into European exports of polysilicon to China since November 2012 have now come to an end.

"We were negotiating with Wacker Chemie for about one month from Feb 12 to March 14. The process has been tough," said a statement from the Bureau of Fair Trade for Imports and Exports at the ministry.

The agreement on polysilicon, an important component used in the production of solar panels, will push forward downstream and upstream development related to solar panels for both sides, it said.

"It is a solution foreseen by applicable World Trade Organization rules and is pledging a fair competition environment," said the statement.

"After both sides settled the trade friction on photovoltaic products through negotiation, the solution on polysilicon is further proving that we have the wisdom and capability to manage the bilateral trade friction."

EU Trade Commissioner Karel De Gucht said in a statement: "With this agreement, our industry will be able to pursue its operations in China where there is a substantial demand for high quality polysilicon."

The removal of the trade irritant is also regarded by experts as strengthening China-EU relations.

"The settlement will push forward the investment treaty talks between China and the EU, meanwhile, giving impetus to China's free trade deal with Europe," said Song Hong, an economist at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences.

Last year, De Gucht announced he would launch a formal investigation into the sales practices of Chinese mobile telecommunications equipment makers, including Huawei Technologies Co Ltd and ZTE Corp, to try to protect the key technology sector of Europe's economy from unfair competition.

Song said the settlement on polysilicon is a follow-up negotiation after the solar panel case and the telecommunication quarrel.

"It is setting a good example for resolving future friction and also preparing for the upcoming European visit of Chinese President Xi Jinping," said Song.

Xi will pay state visits to the Netherlands, France, Germany and Belgium from Saturday to April 1. He will visit the headquarters of the European Union.

Wacker Chemie accounts for practically all polysilicon exports from the EU to China. They had a value of about 700 million euros ($964 million) in 2011.

In January, China released its preliminary findings in this case, claiming that EU polysilicon products were exported at a lower price than sold in Europe, a practice called dumping, and subsidized.

The European Commission has consistently defended the view that the case made by the Chinese authorities was unfounded and that the anti-dumping and anti-subsidy margins provisionally determined by Chinese investigators were inflated.

The EC and Chinese solar panel producers reached a similar agreement in August 2013 in the context of EU's anti-dumping and anti-subsidy proceedings on Chinese solar panels.

The polysilicon probe was widely seen as a response by the ministry to the EU's solar panel investigation, which could endanger Chinese exports valued at about $20 billion a year and more than 400,000 jobs in China.