A failure by China and the European Union to reach a compromise in August over the solar panel dispute will deal a heavy blow to the global new-energy industry and result in huge losses for solar manufacturers on both sides, a former Chinese trade official said on Tuesday.

"If the high punitive tariffs become a reality, players in the entire solar industry chain, including European companies, will suffer heavy losses," said Long Yongtu, former vice-minister of commerce and the chief negotiator of China's entry into the World Trade Organization.

Brussels has set a deadline of Aug 6 for China and the EU to reach a compromise. If that fails, the EU will raise its temporary anti-dumping punitive tariff on Chinese solar exports from 11.8 percent to 47.6 percent until Dec 6 when the EU will decide whether to extend it to a five-year punishment.