In the photo, employees work on a production line of solar panels in Yinglin Solar Comany in Tianjin on June 5. The European Commission announces Tuesday a plan to impose punitive anti-dumping duties on Chinese solar panel imports despite opposition from Germany and other European Union members. [Photo/Xinhua]

The Latin phrase "in vino veritas" means: "Truth is in wine". It means that the truth often comes out when the speaker has had a few glasses. As a former diplomat I know that this is often true, but it is also possible to use wine as a diplomatic weapon when completely sober. Following the European Commission's announcement that they are considering trade sanctions against China over the sale of cheap solar panels, which have already conquered 80 percent of the European market, I would think that Chinese commercial diplomats were very sober and sharp indeed when they hit on European wine exports as a means of retaliation (sorry, I meant a relevant and appropriate counter-argument).

As I mentioned in my recent piece for china.org.cn, Premier Li Keqiang was in Europe in May preaching the message of free trade in Switzerland (where he acquired a historic free-trade agreement) and in Germany, where he deftly exposed a rift on this topic within the European Union. He received a lot of sympathy from Chancellor Merkel on the solar panels issue, as he must have known he would. But the EU has 27 member nations, and despite their economic strength, the Germans were not able to prevent the announcement of provisional sanctions on Chinese exports of solar technology. As everybody understands, this is an initial negotiating position rather than a final decision, but it is not surprising that the Chinese were affronted by the announcement and began to prepare their next move.

And their next move was very well conceived. European wine exports to China form only 8.6 percent of EU wine exports, but 71 percent of those come from France, and most of the rest from Italy. As a coincidental side point, France and Italy were firm supporters of the solar panels sanctions, whereas Germany (which exports nothing like so much wine) and Britain (which produces very little drinkable wine at all) have opposed them. So, without overt discrimination, the Chinese were able to produce a policy which favors their friends and annoys their opponents within the same trading bloc!

The real implications of this are the same as they have always been: China is making use of her lower production costs, and Europe is making use of her brands and quality, to establish and gain market share. I have no idea about the quality of solar panels, and I suspect most Europeans don't. When it comes to this grade of technology, China and the West started out almost together and there is no sense of inferiority on either side. This issue is all about price and about the enormous subsidies European governments are offering for the use of renewable energies such as solar power. Wine, which I do know a bit about, is a different matter.

I do not want to make snide comments about Chinese wine. I have been drinking it for 25 years; I hope no Chinese citizen will be offended if I say it wasn't very good in 1988, but since then the improvement has been enormous. But it is not actually the quality which matters in China; it is the prestige factor. In 1996 I was invited to dinner by a young Chinese property magnate, who had built himself a new villa in which there was a top-class drinks cabinet; he wanted me to explain to him which were the best bottles. (They weren't always the French ones.) That would seem to me the perfect job: Alcohol Consultant to wealthy Chinese.

When (and it's only a matter of time) China produces wine which is better than anything in Europe, the manufacturers will have a terrible time persuading the Chinese elite that it is actually superior. It simply won't be the same displaying wines in one's drinks cabinet which anyone can buy in Carrefour. The enormous taxes levied on European imports are part of the charm and the social cachet. The French may be hoping that higher tariffs on their wine exports will not be such as bad thing, as it would only increase the prestige factor of the produce of the great French vineyards. It might actually improve France's competitive position vis-a-vis her European rivals – Italy, Spain, Germany, and even possibly England. Perhaps the Chinese have miscalculated on this one.

Either way, this is not the last shot in China's locker; nor is the European Commission's position on solar panels their final word. These are just starting positions for a long-term negotiation and there is a long way to go. What is certain is that there is no appetite in Europe for a trade war; and there probably isn't one in China either. In an uncertain world, where the international economic order is in flux, we need each other too badly.

The author is a columnist with China.org.cn. For more information please visit:

http://www.formacion-profesional-a-distancia.com/opinion/timcollard.htm

Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.

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