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China has launched an anti-dumping investigation into imported European dairy merchandise, within the newest escalation of a commerce dispute with the EU.

The investigation comes a day after the European Fee revealed a sequence of further levies on Chinese language electrical automobile imports, regardless of opposition from Beijing.  

The Chinese language commerce ministry mentioned on Wednesday that its probe into EU dairy imports was prompted by complaints from home producers over European subsidies. In line with a press release, the investigation will cowl “sure merchandise” together with lotions and cheeses.

The transfer marked Beijing’s strongest retaliation but towards Brussels’ EV tariffs. China has already opened anti-dumping probes into French cognac and EU pork imports and has lodged a grievance on the World Commerce Group.

The bloc’s chief diplomat, Josep Borrell, mentioned at an occasion in Spain this week that the EU “should not be naive” however {that a} commerce conflict was “perhaps . . . unavoidable”.

The European Fee mentioned Brussels “takes word” of China’s choice to launch an anti-subsidy probe into sure dairy merchandise and would analyse the process “very intently”.

“The fee will firmly defend the pursuits of the EU dairy business . . . and intervene as applicable to make sure that the investigation absolutely complies with related WTO guidelines,” it mentioned.

The EU’s Chamber of Commerce in China mentioned Beijing’s motion “shouldn’t be thought of a shock”.

“Regrettably, using commerce defence devices by one authorities is more and more being responded to seemingly in variety by the recipient authorities,” the chamber mentioned, including that it hoped the investigation would “be carried out pretty and transparently”.

The EU’s greatest subsidy programme is the €60bn-a-year Frequent Agricultural Coverage, which consumes roughly a 3rd of the bloc’s price range. 

Alexander Anton, secretary-general of the European Dairy Affiliation, mentioned he was “assured” that the CAP was compliant with WTO guidelines and that the EU and China “will discover a constructive approach to resolve any bilateral disputes”.

“Vive l’Europe et vive le lait,” he added.

Patrick Pagani, deputy secretary-general of the EU’s greatest farming physique Copa Cogeca, mentioned farmers had “feared this additional escalation within the EU-Chinese language commerce relationship and the continual affect on our sector”.

“Once more we see our well-performing exports being the goal attributable to different disputes,” he mentioned, including that the “most worrying” side was the problem to the CAP, which he described as “unjustified”.

European dairy exports to China had been valued at about €1.8bn final yr, down from €2bn a yr earlier, in accordance with European Fee commerce information, and accounted for about 9.5 per cent of the EU’s complete dairy exports.

The Chinese language dairy business our bodies claimed that imported EU dairy merchandise had benefited from a complete of 20 subsidy programmes. Germany is the bloc’s largest producer of milk, butter and cheese, adopted by France.

The Irish Creamery Milk Suppliers Affiliation warned that the measures may very well be a “savage blow” at a time when dairy farmers are reeling from low costs, poor climate and years of upper enter prices. Eire exports dairy items value €450mn a yr to China.

“If the EU goes to embark on a commerce dispute that wipes out our [milk] powder and butter commerce with China, then ICMSA will probably be demanding that the EU compensate the farmers,” mentioned the group’s president Denis Drennan.

The market share of imports in China’s toddler method market, the place competitors has elevated and laws have been tightened, fell from 51 per cent in 2019 to 44 per cent in 2023, in accordance with Dutch financial institution Rabobank.

China’s declining beginning price has additionally compelled home and overseas corporations to push into new merchandise within the nation, reminiscent of these concentrating on older shoppers.

Imports of milk powder and fluid milk have additionally fallen this yr due to increased home manufacturing, in accordance with estimates from the US Division of Agriculture in Could.

“Progress in uncooked milk manufacturing continues to outpace consumption, creating an oversupply within the Chinese language market,” the report mentioned.

Further reporting by Gloria Li in Hong Kong and Wang Xueqiao in Shanghai