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Will the Potential Trade War Result in Increased Import Taxes for French Wine Coming into China?

france-flagYou may have heard the rumblings about a potential Trade War with China affecting the wine market in France. The Chinese government has threatened to impose an anti-dumping tax on European wines, which is causing concern. Some Chinese wine importers have put their orders on hold whilst others are requesting their shipments of wine are sent as quickly as possible in order to avoid the looming tax.

China has launched an investigation into anti-dumping and the rumour mill has it that the tax could be imposed in August. There seem to have been two triggers that set this off; the first being the China Alcoholic Drinks Industry making a formal request in 2012 to the Ministry of Commerce to look into their worry that wine imports from Europe are harming domestic producers.

chian flagAt the time this was raised I was concerned that China might take protectionist steps as in 2012 wine production in China was expected to reach 2.2. billion litres, an increase of 100%, at an annual growth rate of 15%, according to the 12th Five-Year-Plan (2011-15) for the Wine Industry, published by China’s Ministry of Industry and Information Technology and the Ministry of Agriculture. I thought that if European wine imports continued to interfere with China’s 12th Five-Year-Plan we could see taxes put up on imported wine to encourage the Chinese to buy local.

However, it is the second trigger that seems to have ignited the situation – this month the European Union has provisionally decided to impose steep tariffs on Chinese-made solar panels and the Chinese investigation into anti-dumping is seen as a retaliation to this. The tariff is 11.8% on solar panel imports from the Chinese mainland which will rise to more than 47% in August. The EU will vote this December on whether to to make the tariff on solar panels permanent or not.

KONICA MINOLTA DIGITAL CAMERAWhether all this song and dance will lead to a Chinese tax on wine imports has yet to be seen. A growing number of wine makers in France are Chinese and Bordeaux chateaux are being snapped up on a monthly basis by Chinese investors who want to control the supply chain and see wine tourism as a profitable enterprise. So, an increased tax on imported French wine could affect big Chinese businesses who have invested in French wine producing chateaux, which won’t be popular at home in China.

The French Minister of Foreign Trade, Nicole Bricq has said that negotiations are open between the two countries and that the Chinese anti-dumping investigation will last 6 – 8 months, which gives time in which to talk. Bricq also confirmed that the French wine industry receives no direct export subsidies and therefore does not benefit from dumping measures.

china 3Of course, wine is not the only product being threatened – China is musing over erecting barriers against luxury car imports, with Mercedes, BMW and Ferrari among the likely targets. In addition to solar panels the EU and China are also involved in disputes over steel pipes. The whole situation needs cool heads to prevent an escalation. It could end up just being a war of words or in the worst case scenario it could end up in a tit for tat situation. It really depends on how China wishes to build its alliance with the EU. I suspect that if the EU vote in favour of the tariff on solar panels China will undoubtedly impose the tax on wine, or lose face.

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