Closer Look: China's Trade Gambit with EU Wine

(Caixin) - The European Commission (EC) said on June 4 that it would impose a provisional 11.8 percent anti-dumping tariff on Chinese solar panels from June 6 to August 6.

One day later, China's Ministry of Commerce (MOC) announced it would launch an anti-dumping and anti-subsidy investigation over wine imported from European Union countries. Many industry commentators termed the move as "retaliatory."

"The investigation is based on the complaint of Chinese wine makers," Liu Danyang, deputy director at MOC's Fair Trade for Imports and Exports. "It is a normal trade investigation in accordance with Chinese law."

Several wine industry insiders said that as early as April last year, murmurs that China would open an investigation into the industry had already circulated within the industry. For the first two quarters this year, China had increased its wine imports from European countries, but growth had slowed down.

"Cash flow of wine dealers has been tight for a while due to weak demand from restaurants," said a source who works with a domestic wine distribution company. "Given the timing of China's decision to start the investigation, it's hard to see other motives outside of trade retaliation."

If the purpose of the investigation is indeed to counter solar panel tariffs, just how much leverage will China gain? If it is merely a standard trade investigation, and the tariffs of anti-dumping and anti-subsidy are implemented, will it really restrain imports and protect domestic wine producers?

The total volume of wine imports from the EU to China in 2012 was valued at US$ 1.04 billion. Meanwhile, China's solar panel exports to the EU last year were valued at 21 billion euros, data by EC shows.