EU Takes China to WTO Over ‘Questionable’ Dairy Probe

The World Trade Organization headquarters in Geneva on April 12, 2018. Fabrice Coffrini/AFP/Getty Images

The European Union (EU) has formally filed a complaint with the World Trade Organization (WTO) over the Chinese regime’s decision to initiate an anti-subsidy probe into dairy products shipped from the bloc.

The EU’s executive arm, the European Commission, made the announcement on Sept. 23, and it is the first time that the bloc has challenged an investigation at its initiation stage.

“The EU’s action was prompted by an emerging pattern of China initiating trade defence measures, based on questionable allegations and insufficient evidence, within a short period of time,” the commission said in a statement.

On Aug. 21, China’s commerce ministry announced that it would investigate the subsidies that European milk and cheese producers have received from the bloc.

Products under China’s investigation are milk and cream with a fat content of more than 10 percent and various types of cheese from the EU. The subsidy programs being reviewed by the Chinese ministry include seven under the EU’s Common Agricultural Policy and 13 provided by national authorities in Austria, Belgium, Croatia, the Czech Republic, Finland, Italy, Ireland, and Romania.

The probe came just a day after Brussels unveiled its revised draft decision, preparing to impose final tariffs of up to 36.6 percent on electric vehicles (EV) made in China. This will be added to the current 10 percent duty that the EU levied on all imports.

The dairy probe, which could lead to tariffs on exports to China, was widely seen as a retaliation against the EU’s EV tariff hike, fueling concerns about a full-blown trade war between Beijing and Brussels.

China has already taken the EU’s proposed duties to the WTO and opened similar anti-subsidies probes into the bloc’s pork and brandy after the European Commission opened an investigation into Beijing’s state subsidies to the EV industries in October 2023.

In a further sign of possible retaliation against the bloc’s tariff proposal, China’s state-run media outlet Global Times, in a June report, hinted at the possibility of targeting high-powered gasoline cars imported from the bloc. On Aug. 23, Chinese officials discussed “raising the import tariffs on fuel-powered cars with large displacement engines” during a meeting with automakers and industry associations, the commerce ministry said in a statement published on its website.

The EU’s trade commissioner, Valdis Dombrovskis, during a Sept. 19 meeting with his Chinese counterpart, Wang Wentao, called for the investigation into the EU’s pork, dairy, and brandy to be “terminated.”

“[The] EU will do its utmost to defend the interests of its industries,” Dombrovskis told Wang in Brussels.

Dombrovskis reiterated the call on Sept. 23, urging China to bring the review of the EU’s dairy products “immediately to an end.”

The EU sent the consultation request on Sept. 23, the first step in the WTO dispute settlement proceedings. EU officials said they would ask the WTO to set up a panel if the consultations do not yield a satisfactory solution.

In a statement issued later on Sept. 23, China’s commerce ministry said Beijing received the EU’s request for consultation and defended its decision to open the review.

The investigation of EU dairy products was opened “in accordance with Chinese law and at the request of domestic industries,” the ministry said, adding that “China has a responsibility to safeguard the legitimate demands of domestic industries and their rights and interests.”

The Sept. 23 announcement comes as China’s commerce minister wrapped up his Europe trip and returned to Beijing.

The visit, including stops in Rome and Berlin, comes as the EU’s 27 member states are about to vote on whether to impose five-year EV duties.

The introduction of EV duties would be defeated only if a qualified majority of 15 EU members, representing 65 percent of the EU population, voted against the proposals.

After meeting with Chinese Communist Party leader Xi Jinping in Beijing, Spanish Prime Minister Pedro Sanchez publicly called on the bloc to reconsider the duty hikes on China-made EVs.

Before hosting Wang on Sept. 16, Italian Foreign Minister Antonio Tajani said that Rome backs the duties proposed by the EU.

During the meeting with representatives from Chinese and European EV makers on Sept. 18, Wang vowed to persist in the negotiation efforts “until the last minute” of the EV case.

Experts have called on the EU to hold firm on the position, highlighting the bloc’s leverage over Beijing because of China’s dependence on the European market, the challenges it faces in the U.S. market, and its slowing economy.

“Duties or no duties, Chinese leaders desperately need Europe to remain open to their exports,” Noah Barkin, an expert on Europe and China at the German Marshall Fund, wrote in a Sept. 16 report.

“The EU should hold firm, not because a new US administration will want it to, but because its own geopolitical credibility and industrial future are on the line.”