China has escalated its trade tensions with the European Union (EU) by launching an anti-subsidy probe into imported dairy products from the bloc. This move follows closely on the heels of the European Commission’s release of a revised draft decision concerning tariffs on China-made electric vehicles. The latest investigation is part of a broader pattern of trade scrutiny that China has imposed on various industries in the EU, signaling a deepening rift between the two economic powerhouses.

Focus on Dairy Imports

The most recent probe, announced by China’s commerce ministry, targets a wide range of dairy products from the EU, including cheeses, milk, and creams intended for human consumption. The investigation was initiated in response to a complaint filed by the Dairy Association of China and the China Dairy Industry Association on behalf of the domestic dairy sector. According to the Chinese government, the probe will scrutinize 20 different subsidy schemes from several EU member states, including Austria, Belgium, Croatia, Czech Republic, Finland, Italy, Ireland, and Romania.

The significance of this probe lies in the EU’s substantial role as a dairy supplier to China. In 2023, the EU was the second-largest source of dairy imports for China, accounting for 36% of the total import value, trailing only New Zealand. The EU’s dairy exports to China were valued at €1.7 billion ($1.84 billion) in 2023, though this was a decrease from €2 billion in 2022. The ongoing investigation has the potential to disrupt this critical trade relationship, affecting not just the dairy industry but also the broader economic ties between China and the EU.

Widening the Scope: Pork and Brandy

China’s trade scrutiny is not limited to dairy products. In June, the commerce ministry announced an anti-dumping investigation into EU pork imports, focusing on fresh, cold, and frozen pork cuts, as well as pig intestines, bladders, and stomachs. This probe was also prompted by a complaint from the domestic industry, represented by the China Animal Husbandry Association. The investigation into pork imports could have significant ramifications for EU exporters, particularly those in Spain, the Netherlands, and Denmark, which collectively accounted for a substantial portion of the $6 billion worth of pork China imported in 2023.

In addition to pork, China had also initiated an anti-dumping investigation into brandy imports from the EU earlier in the year. Although the commerce ministry announced on Thursday that it would not impose provisional tariffs on EU brandy, the investigation found that the product had been sold in China below market prices, which had negatively impacted the domestic market. The probe primarily targeted French cognac producers, who dominate China’s EU brandy imports. French companies such as Remy Cointreau and Pernod Ricard have expressed concerns that the investigation was less about market dynamics and more about a broader trade conflict between China and the EU.

Engineering Plastics Under Scrutiny

China’s trade investigations extend beyond food and beverages. In May, Beijing launched an anti-dumping probe into POM copolymers, a type of engineering plastic used in various industries, imported from the EU, the United States, Japan, and Taiwan. This investigation underscores China’s broader strategy of scrutinizing key industrial imports from major trading partners, reflecting the growing complexities in global trade relations.

Implications and Strategic Moves

These investigations are more than just isolated trade disputes; they are strategic moves in the ongoing trade tensions between China and the EU. The timing of the dairy probe, coming just a day after the EU released its revised decision on tariffs for Chinese electric vehicles, suggests a tit-for-tat approach by Beijing. As both sides continue to impose and respond to trade measures, industries on both continents are caught in the crossfire.

The EU, for its part, has expressed concerns about the fairness of these investigations, particularly in light of the broader context of trade relations. The European Commission has stated that it is closely monitoring these probes to ensure that they comply with World Trade Organization (WTO) rules and has not ruled out taking further action to protect EU exporters.

As China continues to expand its trade probes into various sectors, the escalating tensions between the two economic giants could have far-reaching consequences. Industries ranging from dairy and pork to brandy and plastics may face increased barriers to trade, leading to potential disruptions in supply chains and economic losses. Moreover, these developments could strain diplomatic relations, making it more challenging for the EU and China to find common ground on trade and other critical issues.

In conclusion, China’s recent anti-subsidy and anti-dumping investigations into EU imports highlight the growing friction in global trade relations. As both sides navigate these tensions, the outcomes of these probes will be closely watched by industries and policymakers alike, with significant implications for the future of international trade.

(Adapted from CNBC.com)

Categories: Economy & Finance, Geopolitics, Strategy, Sustainability