China to probe EU dairy products as anti-subsidy spat escalates

China has initiated an anti-subsidy investigation into dairy products imported from the European Union, the Chinese Ministry of Commerce said in a statement on Wednesday, in a sign of an escalating trade spat between Brussels and Beijing.

The probe – requested by two state-backed industry groups – was discussed in consultation with the European Commission on August 14, the statement claims. The investigation should be concluded within 12 months but could be extended for another six.

The probe will target EU subsidies in the production of fresh and processed cheese, blue cheese and other cheese, milk and cream products. The Chinese ministry says 20 subsidy programmes in eight member states – Austria, Belgium, Croatia, the Czech Republic, Finland, Ireland, Italy and Romania – will be under investigation.

These include some subsidy programmes under the EU’s Common Agriculture Policy (CAP).

The tit-for-tat move comes less than 24 hours after the EU executive signalled its intention to slap definitive tariffs of up to 36.3% on the imports of China-made Battery Electric Vehicles (BEVs), following a nine-month anti-subsidy inquiry.

That probe found Beijing was pumping generous subsidies across its entire BEV value chain, giving Chinese companies an unfair advantage and threatening to suffocate the EU’s domestic industry by artificially deflating BEV prices.

The EU is also investigating the potentially damaging impact of Chinese subsidies for producers of wind turbines and solar panels on the 27-country bloc’s industry.

Beijing has already launched tit-for-tat anti-dumping investigations into EU pork, liquor and chemical products, as well as a probe into the public procurement of medical devices.

Commission spokesperson Olof Gill “took note” of the Chinese government’s decision in a statement shared with Euronews.

“The Commission will now analyse the application and will follow the proceeding very closely, in coordination with EU industry and Member States,” Gill added.

“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.”

Borrell warns against ‘systematic confrontation’

On Tuesday, the EU’s High Representative for Foreign Policy, Josep Borrell, said the bloc should avoid a “systematic confrontation” with China, as trade tensions between both sides threaten to spill over.

“Our political systems are different, but that shouldn’t lead to a systemic and permanent rivalry,” Borrell said, speaking during the annual “Quo Vadis Europa?” conference in the Spanish city of Santander. “That’s not in our interest.”

But Borrell, who is set to step down after five years at the helm of the EU’s diplomatic arm this autumn, also warned that a trade war between China and other world powers could be inevitable.

“We have no interest in embarking the world on a trade war. However it’s possible that this trade war (… ) is inevitable,” he explained. “It’s in the logic of things.”

He also indicated that Europe’s interests will not always match those of the US, and urged the bloc should to be more ready to do things its own way.

“When they (the US) take trade measures against China – because they do so – they don’t ask us if it suits us or not (in Europe),” Borrell said

“When they ban the import of Chinese cars, or place deterring tariffs, they don’t ask themselves where these Chinese cars that will not go to the US will go. Where will they go? To which other market can they go? Well of course, to the European market, and that causes a competitiveness problem for our industry,” he added.