China decided to start a competition probe against dairy producers from the European Union, in what has been largely considered a retaliation against the confirmed hike in import duties for Chinese electric vehicles producers.
The Chinese commerce ministry unveiled on Wednesday the investigation into the dairy industry, following a request by Dairy Association of China and the China Dairy Industry Association. The probe will focus on subsidies in the sector in several countries across the EU, including Austria, Belgium, Croatia, the Czech Republic, Finland, Ireland, Italy, and Romania. According to French dairy sector body CNIEL, also France is being investigated under the probe.
The European Dairy Association said in a statement that its confident that the sector respects World Trade Organization’s rules on state aid and subsidies. European Commission spokesperson Olof Gill also sought to confirm the sector’s credibility and showed that the EU will support them, saying that they will “intervene as appropriate to ensure that the investigation fully complies with relevant World Trade Organization rules.”
The EU is the second-largest source of dairy products in China after New Zealand. According to data from Eurostat quoted by the European Commission’s Directorate-General for Agriculture and Rural Development, in 2023 the bloc exported €1.7 billion in dairy products, down from €2 billion in 2022. Ireland is the biggest country exporting dairy products in China from the EU, with $461 million exported last year, with France following suit.
The investigation on dairy products is only the second China has launched in the agricultural sector in the past months. In June it launched a similar probe over pork products, which mainly effects Spain as the biggest exporter to China.
Both of these investigations have been interpreted as retaliation against the bloc for its tariffs hike on EVs produced in China. On Tuesday the EU confirmed that it will impose new import duties as high as 36.3% to some producers, after revisiting its findings.
Chim Lee, senior China analyst at the Economist Intelligence Unit told Reuters that “The combined value of EU pork and dairy exports to China —areas of goods potentially affected by tariffs — are smaller than the value of China’s battery EV exports to the EU, which we estimate to stand at around $13.5 billion in 2023.” Because of this and because of “domestic economic pressures, alongside the increasingly important role played by external demand in supporting China’s economy, will keep Chinese policymakers cautious about invoking an overly confrontational approach to trade.”
