China Investigates EU Dairy Subsidies: Impact on Imports

On August 21,2024,the Chinese Ministry of Commerce issued an announcement announcing the initiation of an anti-subsidy investigation into imported dairy products originating from the European Union.This investigation was initiated based on an application from the domestic dairy industry.The applicants argued that the relevant dairy products from the European Union,supported by subsidies from the EU and its member states,have created a price advantage in the Chinese market,thereby exerting unfair competitive pressure on China’s domestic dairy industry.

The subsidy investigation period of this investigation is from April 1,2023 to March 31,2024,while the period of the investigation into industry damage covers from January 1,2020 to March 31,2024.The announcement points out that the dairy products within the scope of the investigation include fresh cheese (including whey cheese) and curd,processed cheese (such as blue cheese and textured cheese produced by Penicillium roqueforti),other unlisted cheeses,and unconcentrated and unsweetened or otherwise sweetened milk and cream (with a fat content exceeding 10% by weight).

The director of MOFCOMs Trade Remedy and Investigation Bureau stated during press Q&A that this investigation was initiated upon formal application by domestic dairy industry.After review confirming the application meets Chinas relevant laws and WTO rules filing requirements,the decision was made to launch investigation.The investigating authority will follow legal procedures to fully protect all parties rights and make objective,fair rulings based on investigation results.

From the application content,domestic enterprises argue that relevant EU dairy imports benefit from subsidies,resulting in significantly lower prices in Chinese market compared to domestic counterparts.Data shows weighted average import prices of investigated dairy products are 30% to 50% lower than domestic products weighted average sales prices,substantially impacting domestic industrys profitability and market competitiveness.Particularly in recent years,substantial growth in EU dairy imports has intensified domestic market pressure.

Customs data indicates that from 2020 to 2023,investigated dairy imports cumulatively increased by 25.8%,with cream imports growing 26.6% in 2023 versus 2020,while cheese imports rose 23.5%.This import volume growth combined with price advantages has placed tremendous operational pressure on domestic dairy producers,with some enterprises operating rates declining to 10-50% and profitability significantly decreasing or turning to losses.

In terms of import sources,the data shows that the cheese and cream imported by China mainly come from New Zealand and the European Union.In the first half of 2024,China imported a total of 88,400 tons of cheese,of which New Zealand accounted for 59.5% and the European Union accounted for 18.7%; imported cream products totaled 70,400 tons,with New Zealand accounting for 85.6% and the European Union accounting for 12.1%.These data reflect that the European Union occupies a certain share in China’s dairy product import market,especially in terms of price competitiveness,the impact of EU products on the domestic market cannot be ignored.

Some relevant food enterprise executives stated that if investigation ultimately confirms subsidy issues with these EU dairy products,China may impose countervailing duties to increase their import costs.However,they believe the impact on domestic downstream market may be limited,as market demand persists and consumer demand for high-quality dairy products wont significantly decrease due to price adjustments.

Original Announcement: