European wine the next victim of EU-China trade war?

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European wine may be the latest victim in the trade war between the EU and China. In what appears to be an exercise in tit-for-tat, China has launched an anti-dumping and anti-subsidy probe into European wine in response to the European Union’s decision to impose duties on imports of Chinese solar panels.

By doing so, China targets southern European states such as France and Italy that back the duties, but largely spares northern European opponents such as Germany. Fifteen EU member states, including the UK and Germany, opposed the duties. Italy and France join 12 others in favour.

The Chinese Commerce ministry said the government had begun the probe into EU wines at the request of Chinese wine makers. “The Commerce Ministry has already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China’s market by use of unfair trade tactics such as dumping and subsidies,” it said in a statement. “We have noted the quick rise in wine imports from the EU in recent years, and we will handle the investigation in accordance with the law.”

The EU plans to slap anti-dumping tariffs on imports of Chinese solar panels from Thursday. Brussels accuses China of selling them below cost to take market share. The EU trade commissioner said that levies will start at nearly 12 percent, potentially rising to 47 percent from August if there is no deal by that time.

Risk of more tit-for-tat trade barriers

Beijing imported 430 million litres of wine last year, of which more than two-thirds came from the EU, according to Chinese customs figures.

Imports from France alone came to 170 million litres. Diageo and Pernod are among the suppliers. China is the third biggest export market for French wines and spirits by value, worth 1 billion euros ($1.31 billion) in 2012 or nine percent of Paris’ wine and spirits exports, according to the FEVS producers’ federation.

Jim Boyce, who runs the wine blog grapewallofchina.com, said Chinese manufacturers have been upset about alleged dumping for a while. “The big issue was all this Spanish wine flowing in here at incredibly low prices,” he said.

The European Union is China’s most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the 27-member bloc totalled 290 billion euros ($376 billion) last year, with 144 billion euros going the other way.

Wine sales are only a fraction of overall exports to the rising Asian economic powerhouse but the move raises the risk of more tit-for-tat trade barriers.

With Reuters

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