UPDATE 2-China opens WTO front in solar power war with EU

Mon Nov 5, 2012 3:18pm GMT

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* Beijing lodges complaint with world trade body

* Argues pricing in Greece, Italy favoured local firms

* EU, Japan brought similar case against Canada

By Tom Miles and Michael Martina

GENEVA/BEIJING, Nov 5 (Reuters) - China opened a second front in a solar power war with Europe on Monday, lodging a complaint with the World Trade Organization to challenge policies that Beijing argues favour firms in Italy and Greece.

Days after warning that it could put punitive tariffs on European Union exports of solar-grade polysilicon, a key raw material for solar power, China said Italy and Greece broke WTO rules.

The two EU states offered a higher electricity price to solar power producers that used mainly locally sourced components, it said.

While details of China's suit have yet to emerge, it appears to be the same complaint that the EU and Japan have brought against Canada - with the WTO expected to rule against Canada.

"The Chinese government has the right and the responsibility to fight for a fair international trade environment for China's solar industry," Chinese Ministry of Commerce spokesman Shen Danyang said in a statement.

Shen said all countries should strengthen industry cooperation and eschew short-term "protectionist" measures.

By lodging its complaint, China triggers the formal process for a WTO dispute and, if talks with the EU fail to resolve the issue, after 60 days it could ask the global trade body to adjudicate.

SUN-BURNT

Solar power has struggled to compete with other fuels without government support, a fact that drove oversupply in the industry, a collapse in profitability and accusations of governments cheating on trade rules to protect their own manufacturers.

Awash with spare inventory, Chinese firms slashed prices 30 percent this year, exacerbating European suspicions that Chinese export prices are set deliberately low to torpedo their rivals in the EU, the world's largest market for solar products.

About 60 percent of China's exports of solar panels and components went to the EU in 2011, generating 21 billion euros ($27 billion) and accounting for 7 percent of all Chinese exports to the region.

Chinese producers include Yingli Green Energy, Suntech Power Holdings Co Ltd and Trina Solar Ltd .

A group of 25 European companies, led by Germany's SolarWorld, filed a complaint with the European Commission in September, claiming Chinese rivals were unfairly benefiting from illegal subsidies, helping to stimulate production to more than 20 times Chinese consumption and close to double global demand.

The United States levelled steep final duties on Chinese-made solar products in October, a move Beijing warned would provoke greater trade frictions in the new energy sector.

The EU is considering slapping similar punitive import duties on suspected under-priced Chinese solar panels, by far the biggest import sector ever targeted by such an investigation.

Although such punitive tariffs - whether in China, the EU or the United States - could alleviate the pain for the companies involved, they could eventually drive up the cost of solar power, making it a less attractive energy source for consumers.

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