Economics, International economy

China raises the ante — and a glass of Bordeaux — in its trade war with the EU

Image Credit: Shutterstock

Image Credit: Shutterstock

Mon Dieu! Madre de Dios! The pending trade war between Beijing and Brussels over rather pedestrian solar panels just got serious — the Bordeaux and Rioja export markets have been thrown into the mix. Yesterday, the EU’s intrepid, if beleaguered, trade minister Karel De Gucht, against the advice of a majority of EU nations, announced duties of almost 50% on Chinese solar panels if no compromise with the Chinese government (read: permanent cartelized fixed prices somewhere close to this tax) is achieved by early August. For the next two months, the tax will be only 11%.

In response, China’s trade ministry announced that it was launching a full-scale investigation of EU wine imports after complaints that these imports — as alleged with PRC solar panels — were being sold below cost and driving budding Chinese winemakers out of business. The Chinese could have threatened retaliation on Airbus jetliners or Mercedes limousines, but no, they went for the gullet. France’s trade minister howled that this was “inappropriate and reprehensible,” no doubt exactly the response the Chinese were expecting — and hoping for. Spain’s response was more measured, consisting largely of a lament that it had been dragged into a fight that it had nothing to do with. (In the voting on solar panels, France had strongly supported De Gucht, while Spain had abstained).

China is the third biggest export market for European wine, and the fastest growing. It now totals over $1 billion, 50% of which stems from France — though ironically, cheap Rioja and Chianti from Spain and Italy are likely better candidates for (spurious) dumping charges.

The moral of all this: in a trade war, achieving victory is a dicey business. How does one calculate the cost/benefit of cleaner sunlit energy against the equally salubrious effects of a good glass of St. Emilion? One hopes that President Obama will take advantage of this opening out in California this weekend to keep President Xi’s glass overflowing with California cabs and chardonnays.

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