China Launches Anti-Subsidy Probe on EU Dairy Imports

By Mei Mei Chu and Joe Cash

Overview

BEIJING (Reuters) – China has initiated an anti-subsidy investigation into dairy imports from the European Union (EU) amid rising tensions with the bloc. This decision comes shortly after the EU presented its revised tariff plan on Chinese electric vehicles (EVs).

Background

On Tuesday, the EU adjusted its proposed punitive duties on Chinese EV imports to 36.3% from an earlier 37.6%. However, the EU did not eliminate these duties as China requested, prompting a strong reaction from China’s commerce ministry, which expressed its opposition and concern, vowing to protect Chinese companies.

Details of the Investigation

The anti-subsidy investigation, announced by China’s commerce ministry, is the latest in a series of probes into EU agricultural products. It will cover various cheeses, milks, and creams meant for human consumption, driven by a complaint from the Dairy Association of China and the China Dairy Industry Association.

China will examine 20 subsidy schemes from 27 EU member nations, focusing on Austria, Belgium, Croatia, Czech Republic, Finland, Italy, Ireland, and Romania.

EU’s Response

European Commission spokesperson Olof Gill stated that the EU would defend its dairy industry’s interests and ensure that the investigation aligns with World Trade Organization (WTO) rules. The European Dairy Association expressed confidence that the EU’s farm subsidies comply with WTO regulations and aims to clarify the intricate trade relationship between the EU and China.

Among the listed countries, Ireland is the largest dairy exporter to China, with exports valued at $461 million last year. France, recognized as the second-largest supplier of cream after New Zealand, is also under the investigation.

Trade Statistics

According to Chinese customs data, the EU was China’s second-largest source of dairy products, accounting for 36% of total dairy imports in 2023. In total, the EU exported €1.7 billion ($1.84 billion) in dairy products to China in 2023, a decrease from €2 billion in 2022.

Previous probes include an anti-dumping investigation into EU pork imports launched in June, affecting Spain, the Netherlands, and Denmark, among others.

Insights

Chim Lee, a senior China analyst at the Economist Intelligence Unit, noted that the combined value of EU pork and dairy exports to China is less than China’s estimated $13.5 billion battery EV exports to the EU in 2023. He added that domestic economic pressures alongside the role of external demand will likely lead Chinese policymakers to adopt a cautious approach to trade tensions.