French in wine emergency with China

The French government has asked for an emergency summit of EU leaders after China threatened to slap a new tariff on wine, in retaliation against a new Brussels announcement.

by Michael Northcott
Last Updated: 19 Aug 2013

If there’s one way to hit the French in the googlies, it’s to threaten their wine industry. On Wednesday afternoon, Beijing said it might introduce a new levy on wine imported from Europe, after Brussels announced an ‘anti-dumping’ tariff on imports of Chinese solar panels. Such a move from the Chinese government marks an intensifying of the trade war between the European Union and China, and is a tough display of tit-for-tat. 

So what is this ‘anti-dumping’ business all about? Essentially, the European Commission created new powers to impose a tariff of 11.8% (with a contingency to rise to 35.8%) on Chinese solar panels, unless China agrees to raise their price. The EU says it is unfair on European manufacturers (of which there can hardly be many) that Chinese producers benefit from large subsidies. 

The difficulty is that China doesn’t like the new law. Italy, Spain and France, which backed the introduction of the tariffs, are now panicking because they currently export €77m, €89m and €546m of wine to China, annually. French president Francois Hollande’s people say that he wants ‘solidarity’ from all 27 EU member states on the issue. China obviously wanted to choose something that would hit the three states that backed it. Wine’s a good one.

China, meanwhile, released a statement saying: ‘The ministry has already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China’s market by use of unfair trade tactics such as dumping and subsidies.’ You’ll note that Beijing has decided to use exactly the same language as Brussels to get its point across.

It adds: ‘We have noted the quick rise in wine imports from the EU in recent years, and we will handle the investigation in accordance with the law.’ Apparently, cheap Rioja is flowing like a burst water main in rapidly growing China, meaning any EU subsidies are dampening the market for Chinese wine makers. 

Amusingly, the EU trade commissioner who took the final decision to smack the tariffs on China, Karel de Gucht, happens to be a wine producer himself. He owns a million-euro stake in a Chianti vineyard in Tuscany. Apparently his own firm has taken subsidies from the government, but the company is claiming that it does not export to China. That’s fine and dandy for him then, but what about the other thousands of wine producers in Europe?

It’s worth noting that this is a pretty severe example of the European Union not having its logic quite the right way about. Attempting to dilute subsidies that other global governments offer their companies whilst many European-borne firms benefit from similar schemes is a sure way to get major trading partners’ backs up. 

Not to mention that the tariff on solar panels can only be of benefit to a few European manufacturers (probably all in Germany). Forcing manufacturers to inflate their prices can hardly be for the good of the people importing them in Europe, anyway…

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