China launched an investigation against subventions on dairy imports coming from Europe, a move which is expected to increase its trade tensions.
The Chinese Ministry of Commerce announced on Wednesday that the investigation will examine subsidies related to milk products produced in Europe from April 2023 until March 2024.
This investigation is aimed at identifying specific items of dairy products, such as fresh cheese and processed. It is anticipated that the investigation will be completed within one year.
The ministry stated that the complaint was filed by the Dairy Association of China on July 29, on behalf of domestic dairy producers.
China, according to Reuters, will review 20 subvention schemes across all 27 countries, including those of Austria, Belgium Croatia, Czech Republic Finland Italy Ireland and Romania.
Global Times, a state-backed publication, reported in June that Chinese firms planned to request authorities open a “anti-subsidy investigation” into the imports of certain dairy products from Europe.
China’s tittle-tat-tat response
China was strongly against the recent EU revision to countervailing duty on Chinese electric cars.
On Tuesday, the European Commission released its latest draft investigation on alleged subsidies to Chinese electric vehicles. The European Commission continued to claim that Chinese EV producers have received substantial subsidy.
It has therefore proposed to impose tariffs up to 36.3% against Chinese automobile companies. The proposal is a small adjustment to the original maximum duty set at 37.6% in July.
CAAM, the China Association of Automobile Manufacturers has strongly opposed the revised EU draft.
China launched an anti-dumping probe in mid-June into the EU’s pork sector, where China has a large export market. It was also widely perceived as a retaliation against the EU for imposing steep tariffs on imported electric vehicles from China.
China and EU dairy trade: Implications of the investigation
China has the second largest market in the world for dairy products, after the United States. In contrast, the EU is one of the largest exporters of dairy products, and the top exporter for cheese and skimmed (SMP).
All EU member states produce milk, which represents a large proportion of EU agriculture’s output.
The total EU milk production has been estimated at around 155 millions tonnes per annum. Germany, France and Poland are the main milk producers, followed by Italy, Ireland, The Netherlands and France. They account for nearly 70% of EU dairy production.
According to Eurostat, the European Commission Directorate-General for Agriculture and Rural Development cites data that shows EU dairy exports to China will drop from 2022’s 2 billion to 1.7 billion euro in 2023.
The EU provides financial support to its dairy producers and farmers through a number of mechanisms. These include a Common Agricultural Policy, as well as tools for market intervention, like public storage, and intervention purchasing, in order to stabilize the dairy price and to help producers during times of volatility on the market.
China’s recent action against EU milk imports shows how agricultural and food products are often singled out during trade disputes.
It is possible that the outcome of this investigation will have a significant impact on the trade dynamics between China, the EU and their respective agricultural industries and economic relationships.
As new developments unfold, this post China opens anti-subsidy investigation into EU dairy Imports may be updated.
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