German chancellor Angela Merkel is urging negotiations as the key to resolving a controversial solar power sector trade dispute between Europe and China.

“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.”

German Chancellor Angela Merkel with Chinese Prime Minister Wen Jiabao

The German leader’s words came at a meeting with the Chinese premier, Wen Jiabao in Beijing.

Her reluctance to support a trade action taken by German solar company, Solar World, may raise the hackles of EU trade commissioner Karel De Gucht, who is taking a tough stance on what are perceived to be unfair trade practices by China.

Mr De Gucht is due 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.

Mr Wen welcomed Ms Merkel’s call for talks, saying it could serve as a model for the solution of trade conflicts worldwide.

Meanwhile 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.

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