China launches anti-subsidy investigation into EU dairy imports as trade tensions escalate

23 Aug 2024 --- The Chinese government has launched a probe into certain imported European dairy products a day after the European Commission released its final revised duties on Chinese electric vehicles.

The news is just the latest in a tense exchange between Brussels and Beijing on trade issues, which could have far-reaching consequences for European food producers.

In a statement posted on X, the China Chamber of Commerce to the EU says the investigation was initiated “by a complaint lodged by the Chinese dairy industry on July 29.” 

It adds: “Governmental consultation was conducted with the EU side on August 14.”

In its recent electric vehicle tariff revisions, the EU reduced the rate of its original tax duties on imports from China. However, China’s announcement of an anti-subsidy investigation into dairy products suggests the Chinese government feels the EU has not gone far enough on these reductions. 

Dairy products investigation 

According to the Chinese government, the probe will focus on various products intended for human consumption, including fresh cheese and curd, processed cheese, blue cheese and milk and cream (with a fat content of more than 10% by weight) that is not concentrated.

In a statement shared with Food Ingredients First, the European Commission says it “takes note” of the Chinese government's decision. 

“The Commission will now analyze the application and will follow the proceeding very closely, in coordination with EU industry and member states,” says European Commission spokesperson for trade Olof Gill. 

“The Commission will firmly defend the interests of the EU dairy industry and the Common Agricultural Policy and intervene as appropriate to ensure that the investigation fully complies with relevant WTO rules.”

Ireland is one the biggest dairy exporters to China, with sales worth €423 million (US$471 million) last year.

Tit-for-tat trade retaliation

Ireland is one the biggest dairy exporters to China, with sales worth €423 million (US$471 million) last year, according to Irish government figures. Charlie McConalogue, minister for agriculture, food and the marine, tells Food Ingredients First  he is “aware of the announcement by China.”

“I will be engaging with the EU Commission to ensure that it has all of the data necessary in so far as Ireland is concerned to resolve any issues raised in the proposed investigation. In this regard I am satisfied that European and Irish dairy exports are fully compliant with WTO rules,” he says. 

Earlier this year, the head of the WTO said she feared 1930s-style protectionism and warned against countries using it as a tool for tit-for-tat retaliation.

In June, the Chinese government launched an anti-dumping probe into the EU’s pork exports. In a similar sequence to the latest news, it followed the conclusion of the European Commission’s investigation into imports of Chinese electric vehicles.

China targeted French brandy imports in another trade dispute in January this year, and in June, it also threatened investigations into wine and dairy, the latter of which has now come to fruition. All categories are worth billions of dollars in trade.

China’s domestic dairy products and ingredients industry is growing. 

Urgently resolve dispute

Dairy group Eucolait has condemned China's latest investigation and called on the Commission to resolve the issue urgently. 

“The EU has proven itself over the years as a reliable supplier of high-quality dairy products and ingredients to the Chinese market. Moreover, in an era where food security is an ever-pressing priority, it is manifestly unfair that food be sacrificed in an industrial dispute concerning electric vehicles,” it says in a statement.

“We call on the European Commission to work at the highest level to urgently resolve this dispute and to ensure that any investigation is conducted in compliance with WTO rules.”

China’s domestic dairy products and ingredients industry is growing, leading to a 7% imports decline in 2023 compared to 2022. Despite this, it remains a major importer of dairy from the EU, according to Eucolait.

The Commission is under increasing pressure from lobby groups and food producers to resolve tensions with significant trading partners like China. It has also been hit by farmer protests over its Green Deal and other policies, with farmers calling for the relaxation of rules to disburse farmer subsidies.

By Sade Laja