China hits back at EU wine over solar panel duties

BEIJING Wed Jun 5, 2013 12:18pm BST

1 of 4. A man smells a glass of red wine from Italy's Rosso Vino vineyard during the 6th Shanghai International Wine Trade Fair in this June 1, 2011 file photo.

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BEIJING (Reuters) - China hit back at European wine exports on Wednesday in response to the European Union's decision to impose duties on imports of Chinese solar panels, as tensions mounted between two of the world's biggest trading partners.

In a step targeting southern European states such as France and Italy that back the duties but largely sparing north European opponents such as Germany, Beijing said it launched an anti-dumping and anti-subsidy probe into sales of European wine.

The EU will impose duties on imports of Chinese solar panels from Thursday, but dramatically reduced the initial rate after pressure from some large member states led by Berlin in the hope of negotiating a settlement with Beijing.

China's Commerce Ministry said the EU's duties were imposed despite China making great efforts and showing enormous sincerity in trying to resolve the matter through talks.

"The European side still obstinately imposed unfair duties on Chinese imports of solar panels," the ministry said in a statement on its website (www.mofcom.gov.cn).

In a cautious first reaction, German Economics Minister Philipp Roesler renewed Berlin's call for a negotiated solution and warned of the danger of wider trade confrontation.

"The EU must always negotiate and I think there's still the chance to quickly sit at the table and agree on a fair framework and definitely avoid a trade war that would affect many more areas than the photovoltaic sector," he told German television.

France's trade ministry condemned the Chinese move as "inappropriate and reprehensible", accusing Beijing of opening a new front in an unrelated area. French President Francois Hollande called for a meeting of the 27 EU member states to show their solidarity on trade issues, a government spokeswoman said.

In a brief response, a European Commission spokesman told a daily news briefing that there was no dumping or subsidy of European wine exports to China and the EU authorities would defend their wine producers. He declined to comment on concerns about a trade war, saying Brussels did not use such terms.

The Chinese ministry said the government had begun the probe into EU wines at the request of Chinese wine makers.

"The Commerce 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," it said in a statement.

"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."

The move appeared largely symbolic and less severe than if China had targeted hi-tech exports such as Airbus aircraft, made by Toulouse-based European aerospace group EADS.

FRANCE HIT HARDEST

EU wine exports to China excluding Hong Kong, which EU officials said was not covered by the announcement, reached 257.3 million litres in 2012 for a value of nearly $1 billion (651 million pounds). More than half - 139.5 million litres - came from France.

Diageo and Pernod are among the suppliers.

China is the third biggest export market for European wines and the fastest growing, as a rising middle class enjoys the pleasures and status of sipping fine Bordeaux or quaffing Rioja.

Jim Boyce, who runs the wine blog grapewallofchina.com, said Chinese manufacturers have been upset about alleged dumping for a while.

"The big issue was all this Spanish wine flowing in here at incredibly low prices," he said.

In Madrid, a representative of the Spanish Wine Federation said the Chinese move was a potentially serious blow to one of the few bright spots in a country stuck in deep recession since a housing bubble burst in 2008, decimating its economy.

"The saddest thing about all this is that if proceedings are opened and anti-dumping measures such as import tariffs applied, it means a sector that is doing really well will be dragged into a trade war that has nothing to do with it," she said.

Spain abstained on the solar panel duties. Under EU rules that is counted as a vote in favour.

The EU is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the bloc totalled 290 billion euros (244.7 billion pounds) last year, with 144 billion euros going the other way.

Wine sales are only a fraction of overall exports to the rising Asian economic powerhouse but the move raises the risk of more tit-for-tat trade barriers.

The EU now has 31 ongoing trade investigations, 18 of them involving China. The largest to date is that into 21 billion euros of imports from China of solar panels, cells and wafers.

The EU says it has evidence that Chinese firms are selling solar panels below cost - a practice known as dumping. But the initial duty of 11.8 percent announced on Tuesday by European Trade Commissioner Karel De Gucht was far below the average 47 percent that had been planned.

The Chinese Commerce Ministry said it took note of the lower initial rate and called on the EU to "show more sincerity and flexibility to find a resolution both sides can accept through consultations".

(Additional reporting by Ben Blanchard and Xiaoyi Shao in Beijing, Michelle Martin in Berlin, Ingrid Melander and Julien Ponthus in Paris, Blanca Rodriguez in Madrid and Robin Emmott in Brussels; Editing by Raju Gopalakrishnan and Paul Taylor)

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