Wednesday, August 22, 2012

China, wine and a trade dispute

Retaliatory trade actions are increasingly becoming common in "protectionist" times. The trend has not spared both the developed and developing world. The latest example is news trickling in of intended Chinese action on wine from the EU - and this time it is an allegation of wine from EU being "dumped" in China.

The official Chinese government portal reported:
"Wine producers have applied to the Ministry of Commerce (MOC) demanding investigations into whether European imports are damaging China's domestic market. 
Wang Zuming, head of the wine division of the China Alcoholic Drinks Association, told Xinhua, that winemakers want the ministry to look into the increasing amount of EU imports and its impact on the domestic industry. 
EU wine imports surged to 169,114 kiloliters, in 2011, from 35,944 kiloliters, in 2008, at an annual pace of 67.71 percent. In the past four years, its market share in China increased from 4.94 percent to 14.76 percent, Wang said. 
Almost every Chinese winemaker has felt the impact from the EU, he said.
The EU has provided various subsidies to the wine industry, putting Chinese makers at a disadvantage, Wang added."

The China Alcoholic Drink Association (CADA), the group representing local Chinese alcohol drink manufacturers, has apparently sought intervention from the Chinese government against supposed "dumping" of wine from the EU in China, basically implying that the price of imported wines in China were below normal price compared to prices back in Europe and that this adversely affected the Chinese wine industry.This has been reported here.

Reuters reporting on the development noted:
"Wine exports from the EU to China have increased sharply in recent years, reaching 169 million litres in 2011, compared with 35.9 million litres in 2008, Wang Zuming, secretary of the association's wine subcommittee, was quoted as saying. 
"Almost all wine enterprises in China have strongly felt the impact of the attack by wine imports from the European Union, with operations, performance and market share seriously sliding," Wang said. 
"The Chinese wine consumption market has shown great potential. By exporting such large amounts of cheap wine, it's obvious they're trying to seize Chinese market share."

Are some EU countries like Spain and France "dumping" cheap wine into china? Or is it just a case of better, competitive, cheaper wine from Europe int he Chinese market? is European wine subsidized in contravention of EU's WTO obligations ? Does china have a claim under the ASCM or the Antidumping Agreement? Some reports of alleged EU subsidies to wine production is found here.

An interesting fact about Chinese consumers and Chinese wine producers is brought out in the reuters piece above:

"Wealthy Chinese consumers show an overwhelming preference for expensive French wine, and Chinese companies and well-to-do individuals are buying multimillion-dollar wine chateaux in France's Bordeaux region."
Are the wine lovers the real losers in China in this battle or are they the insignificant minority whose voice doesn't really have political or business force? Another example of multiple stakeholders in any trade dispute. 

More glasses of wine will be sipped in China as this trade imbroglio unfolds.


zenmaster said...

I hear that rich chinese buy $100 bottles of wine and mix it with coke to make it more drinkable! Such is the wealth chinese obsession with wine! thatnks for sharing!

zenmaster said...

I hear that rich chinese buy $100 bottles of wine and mix it with coke to make it more drinkable! Such is the wealth chinese obsession with wine! thatnks for sharing!

Srikar said...

Well, those $100 bottles of wine must be from Europe!