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BRUSSELS (Reuters) - The European Union's deal to end a trade dispute over solar panels with China risks creating a downward spiral of prices, further damaging the EU producers it is designed to protect, their association said on Wednesday.
The EU agreed a year ago to allow up to 7 gigawatts per year of Chinese solar panels imports free of duties at a fixed minimum price of 0.56 euros ($0.75) per watt.
However, that undertaking includes a potential change to the minimum price each quarter, based on a solar module price index compiled by Bloomberg. The price was cut to 0.53 euros in April.
China's Chamber of Commerce for Import and Export of Machinery and Electronic Products (CCCME) wrote last week to the European Commission seeking to clarify certain aspects of the undertaking, according to a document seen by Reuters.
EUProSun, which represents about 40 percent of EU producers including Germany's SolarWorld (SWVKk.DE), said CCCME's clarification was in fact a rewriting of the deal and would result in a continuous decrease of prices in Europe.
Milan Nitschke, EUProSun's president, told Reuters that international prices had been stable since mid-2013, but the minimum price had been cut because of the depreciation of the dollar to the euro and a conversion of the dollar-denominated Bloomberg index.
Nitschke said the EU-China deal contained no reference to currency conversion of the index, while there were references elsewhere to exchange rate conversion of other items. China, he said, was now seeking to rewrite the terms to include such a conversion explicitly.
"It was not in the undertaking. It is an index and it shows what is happening in the industry, with prices already below production costs. If we add another factor (currency), then we distort it," he said.
EUProSun says the minimum price is designed to protect EU manufacturers, but that it had failed to do so, with 20 companies having filed for bankruptcy, closed or been sold in the past year.
The cut in the EU minimum price in April itself had an impact on the index, Nitschke said, making a further reduction in the minimum price more likely.
"Even if the currency goes the other way it is unlikely to be enough because you have a downward spiral in operation," he said.
The European Commission was not immediately available for comment.
Reporting by Philip Blenkinsop, Editing by Robert-Jan Bartunek and Mark Potter