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**Abstract**
This week, the China-EU photovoltaic (PV) trade conflict escalated into a high-stakes confrontation. On the 5th, China is expected to release its preliminary anti-dumping ruling on EU polysilicon products, which could mark a significant turning point in the ongoing dispute. Industry experts warn that if the European Commission proceeds with temporary tariffs on Chinese PV imports, it could spark a full-blown trade war.
Beneath the surface of this immediate clash lies a more strategic and long-term maneuver. According to a report from *Economic Information Daily*, while the anti-dumping decision is imminent, the European Commission has also completed its countervailing investigation into Chinese PV products. The findings are set to be submitted to EU member states next month, followed by a voting process. What stands out is the Commission’s clever use of low-tax rules to avoid “double relief†— a practice prohibited under WTO rules — in an effort to justify future actions against what they label as “Chinese subsidies.†This strategy appears to be part of a broader plan to build a legal foundation for future trade restrictions.
On November 5, the European Commission is set to announce its preliminary findings on anti-dumping measures against Chinese PV products. A senior industry insider shared three possible outcomes: First, the imposition of temporary tariffs, which would likely trigger a trade war, even if final decisions later reduce or eliminate the duty. Second, a delay in the decision due to pressure from EU member states. Third, a formal announcement of taxation without immediate implementation. Among these, the first scenario is considered the most probable.
The Commission’s Trade Commissioner, De Gucht, is reportedly pushing hard for this outcome, seeking to leave a political legacy before his departure. Despite opposition from 18 member states, he is determined to move forward, aiming to create momentum for further investigations into other areas, such as China’s telecommunications sector.
At the same time, the Commission has finalized its countervailing investigation into Chinese companies and government subsidies. An initial report is expected by mid-December, followed by a vote among EU members. The preliminary results of the countervailing investigation are anticipated in early August.
In November 2012, two months after the anti-dumping case was filed, the EU launched a countervailing investigation against Chinese PV products. Under EU trade rules, if sufficient evidence of subsidies is found, temporary duties can be imposed within nine months.
Industry insiders suggest the European Commission will intensify its lobbying efforts ahead of the vote, aiming to regain credibility after a previous setback. The upcoming vote is expected to be more complex, and diplomatic talks between China and Europe in the coming weeks will play a crucial role in shaping the outcome.
A key concern is the potential use of the “low-tax rule,†a tactic previously seen in the copper-coated paper case. This approach allows the EU to apply only the lowest tax rate — either based on dumping, subsidy, or damage — thus avoiding the “double relief†issue. In the coated paper case, for example, a company faced a 43.5% dumping margin and 12% subsidy, but the EU only applied a 20% damage-based tax, effectively bypassing double taxation.
In the current PV case, the European Commission has already hinted at an average tax rate of 47.6%, based on the difference between Chinese export prices and EU sales prices. However, critics argue that the methodology lacks transparency, with no public access to survey data from reference countries like India. This raises concerns about the fairness and objectivity of the Commission’s approach.
Some analysts believe the countervailing investigation is not just about taxes, but a longer-term strategy to challenge the legitimacy of China’s competitive advantage. By targeting both the government and enterprises, the EU aims to legally frame Chinese PV products as unfairly subsidized, rather than simply cheap. This has strong political implications and could weaken China’s position in future trade negotiations.
Moreover, the EU has been planning this shift for years. In 2007, then-Trade Commissioner Peter Mandelson proposed opening the door for countervailing measures against non-market economy countries. The 2010 coated paper case marked the beginning of this strategy, and the PV case represents an escalation in both scale and impact.
Legal experts note that the EU is gradually shifting its trade policy toward more frequent use of countervailing measures, rather than relying solely on anti-dumping. This is partly driven by the fact that China is expected to gain market economy status in 2016, making future anti-dumping cases more difficult. Countervailing measures, however, remain a powerful tool in the EU’s arsenal.