The recent announcement by the Chinese department of commerce to investigate unfair trade practices caused by subsidies paid to European dairy farmers has sent shockwaves through the dairy industry. This move is believed to be a retaliatory action against a levy imposed by the European Commission on electric cars imported from China. The European umbrella organisation for the dairy industry, Eucolait, has strongly condemned this development, calling for a swift resolution to the trade dispute.
What does this investigation mean for the dairy sector in Europe and China? Let’s delve into the details and explore the potential implications of this trade conflict on both sides.
Dairy Products under Investigation:
- Fresh cheese, processed cheese, blue cheese, milk, and cream are the products targeted in the investigation.
- The probe covers 20 subsidy projects benefiting the EU dairy industry.
- The investigation is set to last for a year, with a possible extension of another 6 months.
The European Commission has assured that it will closely monitor the proceedings and intervene as necessary to ensure compliance with relevant World Trade Organisation (WTO) rules. This commitment reflects the EU’s determination to defend the interests of its dairy industry and the Common Agricultural Policy.
Impact on Chinese Dairy Imports:
- China is one of the largest importers of dairy products from the EU.
- However, total imports have been declining due to increased domestic production and self-sufficiency.
- In the first half of 2024, dairy imports in China hit their lowest levels since 2018, showing a 14.1% year-on-year decrease.
The decline in import figures has been attributed to China’s growing milk production, projected to increase by 3.2% in 2024. This shift towards self-sufficiency has resulted in decreased demand for imported dairy products from the EU.
Global Trade Dynamics:
- New Zealand remains the top exporter of dairy products to China, holding a 51% market share.
- The US is the second-largest supplier with a 13% share, followed by Germany (7%) and France (4%).
The UK levy board AHDB has noted a decline in whole milk powder imports into China, along with a significant drop in skim milk powder volumes. These trends are expected to impact global trade dynamics and put pressure on prices in the dairy market.
Reactions from EU Dairy Farm Organisations:
- Copa Cogeca, representing EU farm organisations, expressed concern over the impact of the trade dispute on the dairy sector.
- The German dairy industry highlighted the importance of maintaining strong trade relations with China to avoid negative repercussions.
- The Irish Creamery Milk Suppliers’ Association raised concerns about dairy exports being caught up in a dispute unrelated to the sector.
The dairy industry in Europe is closely monitoring the situation and calling for a resolution that protects the interests of farmers and ensures compliance with trade regulations.
In conclusion, the investigation initiated by China into alleged unfair trade practices in the EU dairy industry has raised significant challenges for both regions. As the trade conflict unfolds, it is essential for stakeholders to engage in constructive dialogue and find mutually beneficial solutions to safeguard the interests of the dairy sector. Let’s hope for a speedy resolution to restore stability and promote fair trade practices in the global dairy market.
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