The anti-dumping investigation on China's photovoltaic (PV) products announced by the European Union (EU) on Sept. 6 has the potential of triggering a large-scale trade war, costing 130 billion yuan (US$20.6 billion) and affecting the employment of over 400,000 people.

Anti-dumping – EU's defense trade solution: Anti-dumping investigations are a common solution for the European Union in solving trade disputes. For example, the EU launched an anti-subsidy investigation regarding art paper imported from China on April 14, 2010. Soon after, the EU began writing a new chapter on economic policy, and adopted a critical stance on imported Chinese products.

The Chinese government already faces a spate of challenges regarding exports from China's textile and automotive industries to EU and U.S. markets, as well as the exchange rate of the Chinese yuan (RMB) and rare earth policies. The recent photovoltaic dispute adds yet another challenge to China's struggling export-oriented industries.

The EU announced that it will follow up on anti-dumping measures taken by Washington earlier this year, and will investigate imported PV panels, batteries and components made in China, covering a wide range of products.