The European Commission (EC) said on June 4 that it would impose a provisional 11.8 percent anti-dumping tariff on Chinese solar panels from June 6 to August 6.
One day later, China’s Ministry of Commerce (MOC) announced it would launch an anti-dumping and anti-subsidy investigation over wine imported from European Union countries. Many industry commentators termed the move as “retaliatory.”
“The investigation is based on the complaint of Chinese wine makers,” Liu Danyang, deputy director at MOC’s Fair Trade for Imports and Exports. “It is a normal trade investigation in accordance with Chinese law.”
Several wine industry insiders said that as early as April last year, murmurs that China would open an investigation into the industry had already circulated within the industry. For the first two quarters this year, China had increased its wine imports from European countries, but growth had slowed down.
“Cash flow of wine dealers has been tight for a while due to weak demand from restaurants,” said a source who works with a domestic wine distribution company. “Given the timing of China’s decision to start the investigation, it’s hard to see other motives outside of trade retaliation.”
If the purpose of the investigation is indeed to counter solar panel tariffs, just how much leverage will China gain? If it is merely a standard trade investigation, and the tariffs of anti-dumping and anti-subsidy are implemented, will it really restrain imports and protect domestic wine producers?
The total volume of wine imports from the EU to China in 2012 was valued at US$ 1.04 billion. Meanwhile, China’s solar panel exports to the EU last year were valued at 21 billion euros, data by EC shows.
France, Spain, Italy and Germany are the four main wine exporters to China. The combined export volume from these four countries in 2012 accounted for 96.33 percent of the total amount of wine that the EU exported to China.
France, Spain and Italy voted in favor of the anti-dumping and anti-subsidy investigations conducted by the EU, and only Germany opposed. An anti-dumping tariff from China would most affect these countries. Meanwhile, only Hungary gives direct subsidies to its wine producers. While Germany supports China on the issue of solar panels, German wine makers would not be exempted from China’s investigation.
The wine business is a pillar industry in countries such as France and its government must consider the interests of their wine producers. But the wine makers involved in China’s investigation are generally small chateaus, so they are more limited in lobbying power. Large chateaus always set an export quota for their upscale categories to China, their supply always falls short of demand in China and they will not be affected by the wine investigation.
The amount of wine that China has imported from EU countries increased from 64,000 kiloliters in 2009 to 257,000 kiloliters in 2012, China’s Ministry of Commerce Data shows. The rapid growth of wine exports from EU to China is concentrated on low-to-middle end products, especially wine priced at around 3 euros. But when this wine is exported to China, its retail price is opaque and its profit margin high. “In southern China, the profit margin for this kind of wine is seven times of its export price,” said a wine dealer in Guangzhou.
Chinese dealers could attempt forgoing wine from the EU, but it would be tough to rely entirely on domestic producers. “Wine prices from Chile, Australia, Argentina and the United States are even lower than that of European countries,” said the domestic wine seller, “So they will take up a larger share of the low and middle-end wine market, instead of Chinese wine makers.”
Be the first to comment on "European wine in China: victim of a trade war?"