China to probe EU wine after solar duties imposed

BEIJING (AFP) - Beijing has begun an anti-dumping probe into European wine, the commerce ministry said on Wednesday after the EU imposed tariffs on solar panel imports from China, in a dramatic broadening of the trade dispute.

China is the EU's second-largest trading partner, with US$546 billion (S$683 billion) in two-way business last year according to Beijing's figures, but the move widens a row that has already involved solar equipment and telecoms, chemicals and seamless pipes.

"The Chinese government has initiated an anti-dumping and anti-subsidy investigation procedure into wines from the European Union," commerce ministry spokesman Shen Danyang said in a statement.

Analysts said the dispute threatened to escalate towards a trade war.

On Tuesday, the European Commission imposed anti-dumping duties on imports of Chinese solar panels, with France supporting the move in defiance of German-led opposition.

Berlin's economy minister Philipp Roesler said the move was "a serious mistake", but Paris welcomed the decision as "balanced and responsible".

Beijing's choice of wine as the target for an apparent response may have been a pointed signal.

France was the largest individual wine supplier nation to China in 2012, with 140 million litres sold worth $788 million, according to Chinese Customs figures.

No figures were immediately available for total EU wine exports to the country.

On Tuesday EU Trade Commissioner Karel De Gucht said Chinese solar panels were being sold at up to 88 percent below cost in the European market and the "dumping" was harming the European industry.

As a result 25,000 jobs were threatened and the measures were not protectionist but came within the EU's rights under international trade law to protect its interests, he said.

The Commission is to levy an initial average tariff of 11.8 percent from Thursday, rising to 47.6 percent on August 6 unless negotiations begin based on a Chinese commitment to address the problem.

The Chinese commerce ministry statement did not give further details of the wine investigation, but Shen said China "firmly opposes" the EU move, describing the tariffs as "unfair taxes".

He said China's government and industry had "shown great sincerity and made enormous efforts" to resolve the issue, and that Beijing hoped "the European side will show further sincerity and flexibility".

Tao Jingzhou, managing partner of law firm Dechert LLP China said "it seems like there is a threat of a trade war", adding that would be "in the interests of no-one".

But he warned that Beijing's move could prove counter-productive as it "might well change the political balance built up so far in the EU".

Yao Wei, a Hong Kong-based economist with Societe Generale, added the EU and Chinese moves highlighted rising tensions between the economic giants.

"The conflict is definitely escalating," she said.

The problem was rooted in China's "huge" overcapacity in many industries, she said.

"In order to digest its overcapacity, China will unavoidably intensify global trade tensions.

"It will certainly face more and more similar trade frictions, not just with the EU."