Trade barriers are not the answer to a healthy European solar industry

Solar giants urge end to escalating trade war

07 Nov 2012, 10:31

By Jifan Gao (Chairman & CEO Trina Solar), Dr. Zhengrong Shi (Executive Chairman & CSO Suntech), Liansheng Miao (Chairman & CEO Yingli Green Energy) and Dr Shawn Qu (Chairman, President & CEO Canadian Solar)

Throughout the world subsidy cuts, excess capacity and pressure on prices are creating problems for the manufacturers of solar modules in particular. Some European competitors now believe they have found a way out of the crisis. They are calling for protectionist measures against Chinese competition and have recently submitted a corresponding complaint to the European Commission. But would trade barriers in fact benefit the solar industry? No, in fact the opposite would be the case. They would not just affect Chinese companies but would undermine the competitiveness of solar energy itself, thus threatening thousands of jobs across Europe. In other words it would be doing the European solar industry a serious disservice.

Solar energy will make a major contribution to the energy mix of the twenty-first century, and it has become a significant economic factor throughout the world. In Europe alone some 300,000 jobs have been created in the solar industry since the 1990s. There is good reason to believe that this development will continue - provided the framework conditions are right.

Europe can be proud of its outstanding pioneering work in solar technology - a development which by the way was driven forward by considerable amounts of state aid. However, today's solar industry has to make the transition from a shielded, highly subsidised laboratory of the future to a competitive market - even if this is accompanied by drastic consolidation within the industry. It is the solar module manufacturers who are hurt most, with some European manufacturers regarding Chinese competition as the reason for this painful, but foreseeable development. In fact, many of their problems are homemade. Some of the early stars of the industry and the stock market relaxed on a comfortable cushion of state funding. They failed to adapt their business model fast enough to the changing market environment and to invest in innovation, efficiency and lean production. Many are also burdened down by unfavourable long-term supply contracts for the central raw material of polysilicon.

At first sight the call for protectionism seems to be an opportunity for the European solar industry to make up lost ground. However, the fact is that trade barriers would be a big mistake, especially in the solar industry. Open markets have contributed significantly to the fact that the solar industry is one of the most dynamic and fastest-growing industries in Europe. And these markets are all the more important in that the sector is based on a global value-added chain.

Chinese companies purchase a large proportion of their machines and major production materials from Europe. In Europe Chinese solar modules in turn are incorporated into projects, mounted and maintained by installers of solar facilities, project developers, wholesalers, technicians and maintenance services. In other words the interests of the Chinese and the European solar industry are not so very different. On the contrary, they are closely interrelated. If a solar module is produced in China and assembled in Europe, about 70 per cent of the total added value is generated in Europe. If protectionist measures impact on one part of the value chain the consequences spread far beyond this - in the final analysis damaging the very market they were intended to protect.

Erecting economic barriers may relieve the symptoms of the industry in Europe in the short term by temporarily providing the solar cell manufacturers with a competitive advantage. However, in the long term it can't cure the actual problems. Worse, protectionist measures would set in motion a process that would be disastrous for all the parties involved. The price of solar modules would be pushed up by trade barriers - and at a time of declining state subsidies solar energy would lose its competitiveness. Thousands of jobs along the entire value-added chain would be threatened. The achievement of the EU's climate goals would also be at risk.

It is on account of the immense importance of free trade to us and the entire industry that we, as four leading solar cell manufacturers with Chinese origins, are speaking out together against the complaint recently submitted to the European Commission. We are doing this even though we compete fiercely with one another on the world market, and although we are rivals in the fight for the favour of investors (our companies are all listed independently on the stock exchange). And we are by no means alone in making this appeal against protectionism. Many European solar companies, associations and experts have already spoken out against such measures. Over 160 companies set up under the umbrella of AFASE, the Alliance for Affordable Solar Energy, are campaigning for open markets. At their last summit in Mexico the heads of state and government of the G20 countries also stressed the importance of free trade, warning against the erection of trade barriers.

Moves towards economic protectionism need to be resisted - not just in the solar sector but elsewhere, too, because those who succumb to the temptation of setting up new barriers to competition endanger international trade and therefore economic development as a whole. If the result were to be reciprocal trade sanctions, this would severely affect the global business climate and endanger the already weak economic growth in Europe even further. We are convinced that it will benefit all players on the global solar market and the consumer in particular if no restrictions are placed on free access to the markets.


This sponsored content was provided by AFASE

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