China begins anti-subsidy investigation into European dairy imports

Chinese authorities have launched an anti-subsidy investigation into European dairy imports, in the latest sign of escalating trade tensions between Brussels and Beijing.

The announcement from China’s commerce ministry on Wednesday came a day after the European Commission revealed revised duties on Chinese electric vehicles as part of its examination into what it viewed as artificially cheap cars that posed a threat to jobs in Europe’s motor industry.

The China Chamber of Commerce to the EU said Beijing’s investigation was launched after a complaint from the country’s dairy industry on 29 July. It said consultation with the EU had taken place on 14 August.

China will examine 20 subsidy programmes supporting the production of milk, cream and cheese in eight EU countries including subsidies for dairy storage, young farmers’ allowance and supplementary income and subsidy schemes in the common agricultural policy.

The countries listed in the investigation are Ireland for dairy equipment subsidies, Austria and Belgium for loan schemes, Italy for livestock insurance schemes and dairy subsidies, Croatia for livestock producer subsidies, Finland for three types of farming support, Romania for livestock subsidies and the Czech Republic for a subsidy scheme for farm damage.

Of these, Ireland is the biggest single dairy exporter to China with €423m (£360m) worth of sales in 2023 including dried milk for infant formula, according to Irish government data.

Conor Mulvihill, the director of Dairy Industry Ireland, which represent Irish diary producers, said: “While any threat of trade disruption is unwelcome, and China is an important market for both EU and Irish dairy, Irish dairy is well diversified in its product mix and destination countries.”

He pointed out that the investigation was only into a subsector of the dairy market. According to the official statement it includes “fresh cheese (including whey cheese) and curd, processed cheese … blue cheese … and other unlisted cheeses”.

The European Union Chamber of Commerce in China said the investigation should come as “no surprise” after the EU’s use of trade defensive measures in relation to exports of Chinese electric cars.

Beijing has already launched retaliatory competition inquiries into politically sensitive European imports of pork and cognac.

The European Commission said it took note of China’s decision to launch the investigation into imports of certain dairy products.

A spokesperson said: “The Commission will now analyse the application and will follow the proceeding very closely, in coordination with EU industry and member states.

“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 [World Trade Organization] rules.”

This week the EU’s top diplomat, Josep Borrell, said the EU should avoid a “systemic confrontation” with China, but warned it was possible that a trade war could be inevitable.

By the end of October Chinese carmakers that have failed to cooperate with the EU’s electric vehicles investigation could face a tariff of up to 36.3%, on top of the existing 10% EU duty on cars.

After an investigation, the European Commission said the authorities in China had provided lavish subsidies to Chinese electric vehicle manufacturers at every stage of the production process, making the cars so artificially cheap that European rivals could in future be forced to shutter factories and lay off workers.

EU officials have launched separate anti-dumping inquiries into Chinese-made solar panels and wind turbines.