Bordeaux winemakers sound alarm as EU-China trade war looms

Fears of an EU-China trade war mounted on Wednesday after Beijing launched an anti-dumping investigation into European wine imports, a move greeted with alarm in the vineyards of Bordeaux, France.

The announcement of the wine dumping probe came a day after the European Commission imposed anti-dumping duties on solar panels imported from China.

China is Bordeaux’s biggest export market and takes around one in five of the bottles produced in the renowned area, where up to 55,000 jobs depend on the sector.

“We are taking this very seriously,” said Allan Sichel, the president of the Bordeaux wine merchants federation.

“We are not yet at the stage of retaliatory measures but that could be the outcome.”

He said Bordeaux was the leading wine imported into China, “so it is Bordeaux that will be hit the hardest”, and that Chinese sanctions “would be catastrophic for the majority of winemakers”.

The commission announced the immediate imposition of a tariff of 11.8 per cent on Chinese solar panels. That will rise to 47.6 per cent on August 6 if there is no resolution of the dispute.

France has urged its EU partners to stand up to Beijing on allegations of selling solar panels below cost in a bid to corner the European market.

But the 27-nation EU is divided over the decision to launch a dumping probe.

German government spokesman Steffen Seibert said Chancellor Angela Merkel agreed with China’s leadership when they said they wanted a negotiated solution.

“It isn’t in Europe’s, Germany’s or China’s interests to seek a trade dispute,” he told reporters.

German Economy Minister Philipp Roesler reiterated that Berlin regarded the French-backed decision as a “serious mistake” by the commission, the executive arm of the EU and its representative in global trade discussions.

Brussels claims the Chinese panels are being sold at up to 88 per cent below cost in the European market, threatening 25,000 jobs in the European industry and breaching international trade rules.

China branded the tariffs “unfair” and immediately announced the investigation into wine imports.

As analysts warned that a damaging trade war was now a real possibility, Chinese officials urged the EU to show “sincerity and flexibility” in trying to resolve the issue.

China’s decision to focus its retaliation on the wine sector suggests France may be paying the price for its high-profile support for the commission’s action over solar panels and for a broader “rebalancing” of trade with China. That was a campaign promise by President Francois Hollande ahead of last year’s election.

According to commission figures, China bought 763 million euros’ (HK$7.6 billion) worth of wine from Europe last year, of which 546 million euros came from France, 89 million euros from Spain and 77 million euros from Italy.

The Chinese wine market is of enormous importance for producers around the world.

Regarded by many in the industry as the answer to a global glut, it is only in its infancy, with imported wine still the preserve of a tiny minority of the 1.3 billion population.

A commission spokesman in Brussels said China was entitled to start an investigation but insisted there was no basis for it.

They did not believe any dumping had taken place, nor were the wines exported to China subsidised, he added.

Although the EU does not subsidise exports of wine directly, it does provide support to producers through a variety of programmes which could, arguably, be viewed as having on impact on the prices they can afford to sell at.

Yao Wei, a Hong Kong-based economist with Societe Generale, said the spat over solar panels and wine was rooted in China’s “huge” overcapacity in many industries.

“In order to digest its overcapacity, China will unavoidably intensify global trade tensions,” she predicted. “It will certainly face more and more similar trade frictions, not just with the EU.”

China is the EU’s second-largest trading partner with US$546 billion in two-way business last year, according to Beijing’s figures.