Cool heads needed as EU launches China solar panel probe (Originally published 07/09/12)

The European Commission’s decision on September 6 to start investigating suspected dumping of Chinese-made solar panels has sparked fears of a damaging Brussels-Beijing trade war. It should not: the EU-China relationship is much too important to be jeopardized by anti-dumping inquiries which – however sensational – represent a minor percentage of EU-China trade.The solar panel case has been on the EU drawing board for several months, prompting repeated warnings from China that any EU action would hurt the global clean energy sector and lead to damaging tit-for-tat measures.The group of European solar companies, led by Germany's SolarWorld, and including Italian and other European firms, says Chinese solar firms have been selling panels below market value in Europe. Chinese producers in the firing line include Yingli Green Energy, Suntech Power Holdings Co Ltd, Trina Solar Ltd and Canadian Solar Inc.The inquiry is not unexpected. Under EU law, the Commission is bound to open an anti-dumping inquiry if the complaint satisfies certain basic requirements. Officials say this is the case.The timing of the investigation is unfortunate, however: it comes just days before the EU and China hold summit talks in Brussels. The meeting on September 20 will be the last formal encounter between Premier Wen Jiabao – who has invested much time and effort in developing China’s EU connection - and senior EU policymakers before he hands over the baton to his successor (widely expected to be Vice Premier Li Keqiang).The EU action follows close on the heels of German Chancellor Angela Merkel’s much-publicised visit to Beijing last week. Ms Merkel has said she wants the dispute over solar panels to be resolved through dialogue, not an anti-dumping investigation. She has also sought to reassure her worried Chinese hosts on the “absolute political will” of Eurozone countries to stabilize their currency.Merkel’s visit coincided with a Chinese announcement that it was purchasing 50 Airbus planes worth over $4 billion, the first significant order since a dispute between Beijing and Europe over emissions trading.Wen’s farewell meeting with the EU should certainly not be soured by the anti-dumping case. There should be no repeat of the acrimony generated at the EU-China summit in 2010 over EU criticism of China’s currency policy.Both sides have mended fences over the last two years. Discussions continue over human rights, market access and investments. But the Eurozone crisis and China’s increased economic clout has led to a change in the EU’s view of China. As such, European Commission President Jose Manuel Barroso and EU Council President Herman Van Rompuy are likely to focus on the many areas where the EU and China have succeeded in building a stronger partnership rather than on trade and other irritants.There are initial encouraging signs that Beijing is toning down its earlier rhetoric. In contrast to earlier statements, China's immediate response to the anti-dumping inquiry been measured, with no mention of any retaliatory steps.“China expresses deep regret” about the decision, Ministry of Commerce spokesman Shen Danyang said in a statement on the ministry's website (www.mofcom.gov.cn).“Restricting China's solar panel products will not only hurt the interests of both Chinese and European industry, it will also wreck the healthy development of the global solar and clean energy sector,”said Shen.He urged the EU to “seriously consider China's position and proposals, and to resolve friction over solar panel trade through consultations and cooperation”.China sold about 21 billion euros in solar panels and components to the EU in 2011 - about 60 percent of all Chinese exports of the product.Total EU imports from China were valued at 292 billion euros last year. Imports of Chinese products subject to trade defense duties total less than one percent of that amount. The US also imposed duties on solar panel imports from China in May after a similar initiative led by SolarWorld there.Europe’s solar companies are divided over the dumping case. Some such as those that install panels say Europe should welcome Chinese imports because they make solar power more affordable and are essential for the 27-member bloc to achieve its goal of having 20 percent of energy from renewables by 2020. EU companies that have sold machinery to China to produce photovoltaic cells have also expressed misgivings.EU governments are unlikely to see eye to eye on the investigation. Berlin is wary of annoying a country with which it has forged a trade-based “special relationship” and which remains an important ally in efforts to stabilize the Eurozone.Others may also hesitate. The EU-China relationship has been gaining momentum in recent months. At their last summit in Beijing in February, the EU and China launched a high level people-to-people dialogue on a par with their discussions on strategic issues and on economic questions.An urbanization partnership is now in full swing with mayors’ from Europe and China set to meet in Brussels on September 19 for two days of discussions.In addition, EU and Chinese business leaders will meet for their own summit on September 20 to discuss investments and innovation.The upcoming EU-China summit is not expected to result in any headline-grabbing new initiatives but practical new cooperation tracks will emerge. Leaders are expected to launch discussions on water security, a rural development partnership and talk about cyber security.The focus on practical engagement and cooperation in areas of mutual interest should define the EU-China relationship in the coming years. China and Europe are increasingly interdependent, a fact that Merkel understands and underlines.As such, instead of fearing Germany’s determination to build ever-stronger relations with China, Berlin’s partners should encourage such moves. The German-China “special relationship” adds to the EU’s clout and influence when talking to Beijing.Talk of competition between the EU and Germany in dealing with China should be jettisoned. Instead, the EU should take a leaf from Berlin’s book of practical diplomacy and engagement with Beijing. What’s good for German-Chinese relations will boost, not undermine, EU-China relations.

Asia 2050: Hopes and Challenges (Originally published 05/10/11)

For insight into the historic changes taking place in Asia, read and compare the Asian Development Bank’s recent ground-breaking report (Asia 2050: Realising the Asian Century) tracking Asia’s seemingly unstoppable rise with the World Bank’s seminal study on The East Asian Miracle published in 1993.East Asia’s eight turbo-charged power houses described by the World Bank two decades ago have now been joined by China – the biggest development story in the world today and the region’s dominant economy. India, while not an East Asian state, is part of the region’s growth trajectory as are Australia and New Zealand.The East Asian Miracle pointed to strong fundamentals, international integration, and good government as the key factors of success in East Asia. But it all came crashing down a few years later as the region was brought to its knees by the 1997-1998 financial crises. Complaints about corruption, nepotism, poor financial regulation and more dominated the headlines. The region was expected to lose years of growth. Asia faltered but it did not fail.The recovery has been difficult but relatively rapid as governments got serious about putting their houses in order. Today Asia is doing better than anticipated and the region has – so far – managed to escape relatively unscathed from the slowdown affecting Europe and the US.As the ADB underlines, if Asia’s march to prosperity, being led by seven economies with more than 3 billion people between them – China, India, Indonesia, Japan, South Korea, Thailand and Malaysia - continues apace, there will be some 3 billion additional affluent Asians by 2050. Asia’s combined GDP – also including poor nations such as Laos and Pakistan – will rise from 17 trillion dollars last year to 174 trillion dollars in 2050. In short, Asia will retain the dominant economic position it held 300 years ago.But Asia’s ascendance is not set in stone. Countries could slip and stumble into a middle income trap of stagnation and slow growth. And even as we celebrate rising Asia, it cannot be forgotten that the region is still home to almost half the world's absolute poor, who earn less than 1.25 dollars a day.

Emerging economies face the risk of being stuck in the "middle-income trap" as bursts of rapid growth, driven by export-based manufacturing, are followed by periods of stagnation or decline.

There are other key challenges -- rising inequality within and between countries, poor governance and corruption in many of them, and intensifying regional competition for finite natural resources.

In the worst case, according to the ADB, Asia could face “a perfect storm” of bad macro-economic policies, unchecked financial sector exuberance, conflict, climate change, natural disasters, changing demography and weak governance.

To make Asian growth sustainable, the study says, countries must address poverty, equality of access and opportunity, and focus on education, entrepreneurship, innovation and technological development. Massive urbanization will need to be tackled.

Climate change is “a wild card for Asian development”, warns the study, which stresses that Asia is already hit by more storms, floods and other natural disasters than any other region.

Asia must retool its institutions to ensure transparency, accountability and predictability in order to respond to demands for greater voice and participation in government being made by an expanding middle class.

Significantly, regional cooperation and integration are seen as vital for Asia’s continuing rise. The ADB also correctly insists that Asia will need to take greater ownership of the “global commons” and transform itself from a passive onlooker in the debate on global rule maker to an active debater and constructive rule maker.

Changes in Asia are impacting not only on the region itself but across the world. The United States is stepping up its engagement with all major Asian actors. In fact, if any thing China’s economic rise has increased other Asian countries search for closer military and security links with the US.

Is there a role for Europe in the Asian Century? Certainly, Europe has strong historical, cultural and economic ties with Asian countries. However, as pointed out in a Friends of Europe policy briefing and conference held in June 2011, enhanced Europe-Asia cooperation in the political and security spheres, requires stronger mutual understanding and a deeper knowledge of each other.

Key findings of the ADB report and Europe’s potential as a partner to help Asia maintain its growth trajectory were the subject of our breakfast debate entitled "Asia 2050: Challenges ahead" on 6 October 2011.