China launches 'tit-for-tat' investigation in response to EU trade barriers

By Bloomberg News

China is investigating whether the European Union’s spate of actions against the world’s No. 2 economy constitute an illegal barrier to free trade, as the two blocs edge another step closer to a trade war.
 

The Ministry of Commerce said the Chinese probe would span a range of sectors, including rail, solar and wind power, and security equipment in a Wednesday statement. Those are areas the EU has targeted in recent months with an array of new tools, which it says are designed to defend itself against Beijing’s unfair practices.

If Beijing determines an EU measure to be illegal, Chinese officials could conduct bilateral talks, start a multilateral dispute settlement and take “other appropriate measures,” according to the rules of the probe. In a separate document, the ministry said steps could include a recommendation to introduce “retaliatory measures.” 

A spokesperson for the European Commission didn’t immediately reply to a request for comment. 

Beijing’s relationship with the EU has hit fresh lows in recent months, as the bloc brings its China policy closer to that of the US. American and European leaders have slammed Beijing for flooding their markets with a surge in cheap exports, and raised the alarm about strengthening economic security as tensions flare.

At the center of those strains with the EU are China’s electric car exports, which Europe is worried threaten jobs in its own autos sector. The bloc last week set provisional tariffs as high as 37.6% against some car exports from China, after US President Joe Biden announced a new 100% tariff on such Chinese products.

On top of that, the EU has launched a probe into China’s procurement of medical devices under a new tool to ensure reciprocity, and used fresh anti-subsidy rules to raid a Chinese security equipment firm it claimed had used subsidies to distort the market. 

China, which says the EU’s actions violate the principle of free trade, has responded with investigations into French brandy and Spanish pork, as well as telegraphing threats against other industries such as large-engine cars that Germany specializes in and aviation, a sector where France looms large. 

Beijing’s wide-reaching investigation should be completed by Jan. 10, with a possible extension till mid-April, according to the Ministry of Commerce statement. The probe was launched on the back of a request from the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, it added.

The results will come shortly after the November deadline for the EU to decide whether to impose lasting tariffs on electric cars from China. 

Behind closed doors talks are underway on the EV tariffs, with the EU welcoming China to respond to the findings of its probe. Despite that, the EU ambassador to China said Beijing only recently responded to the bloc’s requests for talks — a claim commerce officials dismissed as “definitely inconsistent with facts.”

China opened a similar investigation into Taiwan’s ban on some Chinese imports last year. After the Commerce Ministry ruled such an action constituted a trade barrier, Beijing ended concessions on some Taiwanese chemical imports, and said it was studying the suspension of more allowances on other products from the island.