A trade agreement with China will give European companies the opportunity to compete in the Chinese solar power market, the EU's trade commissioner said.

Karel De Gucht, the trade commissioner for the European Union, said both sides settled a long-standing dispute over a "trade irritant" involving polysilicon, a component used in the production of solar panels.

"With this agreement, our industry will be able to pursue its operations in China where there is a substantial demand for high quality polysilicon," the commissioner said in a statement Tuesday.

De Gucht said the settlement strengthens bilateral ties to China.

China in 2012 launched an anti-dumping probe into German polysilicon producer Wacker Chemie. The settlement was reached between the German company and the Chinese Ministry of Commerce

"The agreed solution is in the best interests of both Wacker and China's solar industry," Rudolf Staudigl, the company's chief executive officer, said in a statement.

Chinese-manufactured solar products account for more than half of the global market and are a main source of European imports of renewable energy goods. In the past, China was accused of selling solar power components to the European community at below market price.