This article discusses the solar energy industry in Europe, and a recent proposal by the European Union to impose antidumping duties against China.

Four years ago, in the midst of Europe’s solar energy boom, Wacker Chemie opened a new polysilicon factory in its sprawling chemicals facility in the small Bavarian town of Burghausen. There, in a production hall as large as an aircraft hangar but as clean as a laboratory, ultra-pure ingots of polysilicon—the most basic ingredient in photovoltaic cells—take shape in custom-built reactors heated to more than 1,000C. These days, the boom is over and Wacker’s factory, with its 2,400 workers, is looking vulnerable. The company has been caught in what is shaping up to be a decisive trade fight between Europe and China and Wacker executives are worried about collateral damage.

Last September the EU launched its biggest ever investigation, probing billions of euros of imports of Chinese solar equipment. This week Karel De Gucht, the EU trade commissioner, urged that provisional duties averaging 47 percent be imposed on the country’s exports of solar panels for dumping, or selling products below cost, in Europe. For Wacker, the fear is that such measures will backfire by pushing up solar equipment prices for consumers and further undermining an industry already under pressure in Europe. Adding to their unease is the likelihood that Wacker will be first in line for Chinese retaliation. Late last year—just weeks after the EU opened its investigation—Beijing launched its own probe into Europe’s polysilicon manufacturers. “This simply does not make sense,” says Rudolf Staudigl, Wacker’s chief executive, who is pleading with Brussels to hold fire. “If tariffs are implemented, Europe will be damaged more than China.”

The case has risen to the highest political levels, with Angela Merkel, the German chancellor, last year calling for a negotiated solution amid concerns that the confrontation could precipitate a full-blown trade war.

Source: Excerpted from “Solar Flares,” Main Paper, May 10, 2013, p. 7. From the Financial Times © The Financial Times Limited 2013. All Rights Reserved.

Questions to Consider

After reading Solar Flares, consider the question(s) below. Then “submit” your response.

Question