By Kathrin Hille and Joshua Chaffin, FT.com
August 31, 2012 -- Updated 0217 GMT (1017 HKT)
German Chancellor Angela Merkel and Chinese President Hu Jintao in Beijing on August 30, 2012
A contentious EU trade case targeting Chinese solar panel companies should be resolved through negotiations, Germany's chancellor said on Tuesday, reflecting Beijing's growing clout with its European trading partners.
Angela Merkel's reluctance to support a trade action instigated by a German company was communicated at a meeting in Beijing with Wen Jiabao, the Chinese premier, and appeared to put her on a collision course with Karel De Gucht, the EU trade commissioner who has taken a harder line against Beijing for what he contends are unfair trading practices.
Mr De Gucht is expected to open a formal investigation next week to determine whether Chinese manufacturers have dumped their products on the EU market. That review could lead to punitive tariffs -- an outcome the chancellor told her Chinese hosts she was keen to avoid.
"We should try to solve the problems in the solar sector to avoid an anti-dumping case," Ms Merkel said. "We have time for that, and it would be better if we could find a solution through talks."
Mr Wen welcomed Ms Merkel's call for talks, saying it could serve as a model for the solution of trade conflicts worldwide. A spokesman for Mr De Gucht said: "We've seen Chancellor Merkel's comments and we take note of them."
Privately, EU officials and diplomats said it was unlikely that talks to resolve the dispute could be concluded before a 45-day review period ends next Friday. They also noted that Mr De Gucht was required to handle cases in accordance with EU trade law -- not diplomacy.
The solar panel case, filed by Bonn-based Solar World, is particularly sensitive, given governments' strategic interest in the renewable energy industry as a source of jobs and competitiveness.
The EU has struggled to forge a common trade policy among its 27 member states, particularly when each is jockeying for its own lucrative commercial ties with Beijing.
Ms Merkel led a 150-strong delegation to Beijing including dozens of executives and nine members of her cabinet, highlighting what German diplomats described as the "special relationship" between Beijing and Berlin.The two countries signed 18 agreements on Thursday, including a $3.5bn deal under which ICBC Leasing will acquire 50 Airbus aircraft.
Managing trade relations has been further complicated by EU attempts to persuade Beijing to deploy some of its massive foreign exchange reserves to ease the eurozone debt crisis.
Ms Merkel assured the Chinese premier of eurozone countries' "absolute political will" to stabilise their currency. Mr Wen urged the EU to balance fiscal reform with economic stimulus.
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