Commission Takes Aim at Chinese Solar Panels
But also — Corruption, Nature Restoration Law, Trade and Technology Council, Inflation, Ukraine, Russia
Hi! Today is Wednesday 10th April, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
On 3 April, the European Commission initiated two in-depth investigations under the Foreign Subsidies Regulation (FSR). The targeted companies are both Chinese solar panel producers.
WHAT’S HAPPENING • These investigations target two companies involved in a public procurement procedure in Romania. The design, construction, and operation of a 110 MW photovoltaic park, partially financed by the EU, are at stake.
According to the FSR regulation, a company is required to notify its participation in a public tender in the EU if:
The public procurement exceeds €250 million, and
The company has received at least €4 million in non-EU financial contributions in the 3 years preceding the notification.
The Commission believes that foreign subsidies received by two consortia of Chinese companies could distort competition within the internal market:
The first is a German subsidiary of Longi Green Technology, one of the world's largest producers of solar panels and photovoltaics.
The second brings together two subsidiaries of the Chinese state-owned company Shanghai Electric (Shanghai Electric UK and Shanghai Electric Hong Kong International Engineering).
RISKS • The investigation will allow the Commission to determine whether the subsidies received by these companies distort competition within this public procurement. The investigation must be completed within 110 working days after March 4th, the date of notification from the two consortia.
Possible outcomes of the investigation include:
The Commission may request Chinese companies to make commitments to remedy the competition distortion.
Companies may be barred from being awarded the public contract.
The Commission may also choose not to object.
CRRC • However, it is also possible that one or more of the targeted companies withdraw from the public procurement before or during the Commission's investigation. This is what happened in the context of the last — also the first — investigation by the Commission under the Foreign Subsidies Regulation.
Launched in mid-February, the investigation targeted a subsidiary of the Chinese state-owned train manufacturer CRRC in a Bulgarian public procurement for the provision of multiple electric trains, maintenance services, and staff training. To read our edition on the subject, click here.
The company withdrew from the public procurement itself just over a month after the investigation was announced. It is difficult to know the exact reason behind that, but it can be assumed that the Commission's requirements for document disclosure and transparency led the company to prefer withdrawing rather than facing an in-depth investigation.
"In just a few weeks, the first investigation opened under the Foreign Subsidies Regulation has already yielded results," commented Internal Market Commissioner Thierry Breton.
REACTIONS • This second investigation under the FSR concerns a sector that is particularly vulnerable to Chinese competition.
"Solar panels have become strategically important for Europe: for our clean energy production, jobs in Europe, and security of supply," said Thierry Breton regarding the investigation.
According to the Chamber of Commerce of China to the EU (CCCEU), the FSR is nothing more than a "a new tool of economic coercion to interfere with the reasonable and lawful economic operations of Chinese enterprises in the EU's green and low-carbon transition market."
CONTEXT • While imports of Chinese panels have allowed many Member States to rapidly increase their renewable electricity production capacities, the European solar panel industry has been sounding the alarm about Chinese competition for several months.
As part of the Green Deal Industrial Plan, the EU’s ambition is for 40% of essential technologies for the energy transition to be produced in Europe by 2030 — including solar panels. But the current situation is worrying. Oversupply, ultra-low prices in the market due to competition from third-country producers, unsold stocks, high production costs: the sector faces significant challenges.
In February, Germany's largest solar panel producer decided to relocate to the United States, leading to a 10% decrease in production capacity in Germany. In France and Sweden, Systovi and the REC group both closed production plants in recent months.
The Commission remains reluctant to impose anti-dumping duties on Chinese solar panels. Instead, incentive measures are being considered as part of a European Solar Charter currently being prepared by the Commission, Politico reports.
In Case You Missed It
ROLEX • With the help of Austrian, Romanian, and Slovak police, the Italian financial police arrested 22 people and seized several assets as part of an alleged fraud concerning the EU's post-pandemic recovery fund (Next Generation EU, NGEU).
Fraud cases related to European public money fall under the jurisdiction of the European Public Prosecutor's Office, located in Luxembourg. The latter stated that a criminal organisation is suspected of obtaining €600 million in grants from the Recovery and Resilience Facility (one of the NGEU instruments) from Italy between 2021 and 2023.
The money obtained includes funds allocated by Simest, an Italian public entity whose aim is to support small businesses — the company fully cooperates with the investigation.
Of the 22 people arrested, 8 have been placed in pre-trial detention while 14 are under house arrest. "The subjects under investigation used advanced technologies, such as VPNs, cloud servers located abroad, crypto-assets and artificial intelligence software, in order to carry out the fraudulent conducts and to conceal and protect the illegal business," the European Public Prosecutor's Office explained.
The suspects allegedly set up a network of shell companies spanning Slovakia, Romania, and Austria — they transferred money to the bank accounts of these companies as soon as they received Italian payments.
In its annual report published in March, the European Public Prosecutor's Office stated it had opened over 200 investigations concerning the EU's recovery fund in 2023.
Assets seized in this case include apartments, villas, cars, and luxury watches. Here is a glimpse:
ENVIRONMENT • While the Nature Restoration Law was supposed to be adopted by the EU Council on 25 March, the Belgian presidency decided to postpone the vote as it feared that the minimum threshold of 65% of the European population would not be reached (in the context of qualified majority voting).
Indeed, several governments — such as Sweden, Finland, and Hungary — announced before the meeting that they would vote against this text aimed at restoring at least 20% of European terrestrial and marine areas by 2030.
The ambition of the regulation had already been lowered during interinstitutional negotiations between the Parliament and the EU Council. The current version of the text — narrowly adopted by Parliament in February — remains criticised by several European governments who believe that it represents a threat to the agricultural sector.
As elections approach, agriculture is becoming an increasingly sensitive topic across the EU — governments of different Member States are eager not to further alienate farmers.
For this reason, it is likely that the vote will be postponed after the elections. While the Belgian presidency is currently trying to salvage the text, Belgian Prime Minister Alexander de Croo himself described the regulation as "bad."
TTC • Last week, the university city of Louvain in Belgium was in the spotlight as the 6th ministerial meeting of the Trade and Technology Council (TTC) between the EU and the United States took place. This semi-annual forum aims to coordinate policies on key trade and technology issues on both sides of the Atlantic.
This summit did not lead to any major breakthroughs — representatives focused on subjects on which they generally agree.
A joint statement mentions strengthening control over foreign direct investments (FDI) through a joint deposit, extending cooperation for three years on disruptions in the semiconductor sector, as well as a forum on diversifying supply chains for strategic raw materials for green and digital technologies. The European AI Office and the US AI Security Institute will also work together on AI model assessment tools.
With the US election happening in just a few months’ time, the prospect of a second Trump term causes great concern in the EU. Trump has promised to toughen his America First policy, notably through 10% tariffs on all imports. In the scenario of Trump's election, the future of the TTC is more uncertain than ever — some propose to formalise it into a Trade and Investment Framework Agreement (TIFA).
Therefore, this TTC meeting may have been the last. The TTC's track record so far is very mixed: the two parties have not been able to reach a real agreement on customs duties on aluminium and steel, or to finalise an agreement on critical raw materials — an agreement that would have allowed European producers of electric cars to benefit from US subsidies under the IRA (Inflation Reduction Act).
INFLATION • Annual inflation in the eurozone decreased from 2.6% in February to 2.4% in March, according to Eurostat estimates. A closer look reveals the following:
The prices of food, alcohol, tobacco, and non-energy industrial goods are increasing at a slower pace.
Energy prices continue to decline (-1.8%, compared to -3.7% in February).
Services experienced the highest annual rate in March, with a stable inflation of 4% — many economists fear that rapid wage increases will continue to drive prices up in this sector.
Core inflation, which excludes energy, food, alcohol, and tobacco prices (which tend to be more volatile than others) to provide a better idea of price pressures, decreased from 3.1% (February) to 2.8% (March).
Experts believe that the European Central Bank (ECB) will likely choose June to start lowering rates.
UKRAINE • On March 27th, EU ministers reached an agreement on a possible extension of trade liberalisation measures with Ukraine until June 2025. Negotiations on this subject with Parliament will therefore be reopened.
For context, since June 2022, the EU has liberalised its trade with Ukraine on several agricultural products to support the country's economy. These measures (called Autonomous Trade Measures, ATM) were extended once and will expire in June 2023 unless they are prolonged.
Following pressure from European farmers, many of whom are struggling with the competition from cheap Ukrainian agricultural products, the EU Council and Parliament had initially reached a provisional agreement on March 20th to expand the list of so-called "sensitive" products and implement emergency measures in case imports of these products exceed the average level for 2022-2023. These products include sugar, oats, corn, eggs, and poultry.
But several Member States such as Poland formed a blocking minority and effectively paused negotiations on the subject, wanting more ambitious restrictions on imports. France has recently sided with Poland.
The compromise reached by the Belgian presidency of the Council takes into account the demands of these Member States by extending the reference period for calculating the average level of imports to before the start of the war with Ukraine (second half of 2021), a period when Ukrainian imports were lower. In other words, emergency measures can be triggered more easily.
These measures could cost Ukraine approximately €330 million if the country does not find other export markets.
RUSSIA • Belgian and Czech intelligence services have revealed a Russian corruption operation aimed at influencing European public opinion in favour of Russia, including through offering bribes to MEPs.
The Czech Ministry of Foreign Affairs has sanctioned Ukrainian oligarch Viktor Medvedchuk, a close associate of Vladimir Putin accused of conducting a large-scale influence operation in favour of Russia through the pro-Russian Czech media Voice of Europe.
"This confirms what we have suspected: the Kremlin is using dodgy outlets pretending to be media and using money to buy covert influence," said European Commissioner Vera Jourová, responsible for European values, transparency, and democracy, to Politico.
What We’ve Been Reading
"Where does the ECB go next?" asks Martin Sandbu for the FT.
"Despite these huge investment gaps, the EU continues to send a large part of its savings outside its borders," notes Maria Demertzis in an opinion article for Bruegel.
In a paper for Bruegel, Armin Steinbach takes a look at the lessons to be learned from the Eastern Partnership as Western Balkan countries move a step closer towards joining the EU.
This edition was prepared by the What’s Up EU team, including Maxence de La Rochère, Marc Planas, and Gianni Gaboret, and Hana Rajabally. See you next week!