The Impacts of Trade Defence on Global Production Networks: The EU-China Solar Panel Case

This paper seeks to shed light on the interactions between public institutions and Global Production Networks (GPNs) through a case study of the 2012-13 European Union antidumping investigation on Chinese solar panels. The case was highly controversial and heavily debated in Brussels, with different industries and member states taking very different positions. Drawing on trade data and interviews, as well as press reports and position papers, the paper analyses the facts of the case and the debate around it and explores the impacts on the geography of production.

We find that the case has been subject to extensive debate between two ad hoc groups, which represent quite different visions of the ‘European interest’. Most significantly, some EU export- and import-dependent firms saw their interests as strongly linked to those of Chinese exporters. The case thus witnessed the emergence of a trans-regional interest group, a structure that has previously been rare in corporate political activity. This evolution is intimately linked to the emergence of GPNs and the parallel development of lead firms based in emerging markets.

We explore trade flows before and after the case and find that EU imports of solar panels from China fell significantly as the case unfolded, with little trade diversion to other sources. In contrast, in the US market, a similar case resulted in significant trade diversion to Taiwan and Malaysia. Thus the market structure and the nature of the final regulations imposed (which was different in the US), seem to have impacted on the extent to which GPNs restructure in response to anti-dumping measures.

The case draws attention to two issues which deserve greater attention in research in the GPN tradition. Firstly, the position of companies within a GPN may dictate their political interests more clearly than their nationality. Secondly, GPNs are seen to be malleable. They can adjust their structures in reaction to new trade restrictions. This fact highlights to the need to incorporate institutional factors, like trade policy, more effectively into GPN analysis.

In the light of the case and existing evidence from previous work, we propose some characteristics to help researchers to identify sectors where trade policy should be more systematically taken into account in analyses. These are: high MFN tariffs; differentials in the tariff applied between key sources, either through preferential market access, or through trade defence action; importance for employment especially in vulnerable regions; importance for broader societal objectives like environmental protection or high tech leadership.

Finally, in terms of broader political economy, the case illustrates how, in the post crisis context, their domestic market is becoming an important lever for the Chinese government in international negotiations. All actors concurred that fear of retaliation had an impact on the position of Member States in this case. Thus, at least in the trade sphere, the rise of China as a consumer market is changing global power relations.