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Trade Wars: The Chinese Empire Strikes Back

Tyler Durden's picture




 

We reported yesterday that Europe, in a surprising escalation of global trade wars, announced it would impose solar-panel duties against China in one week, with the terms rapidly deteriorating over the next three months. It took China less than one day to retaliate. What's worse the retaliation is aimed at Europe's already weakest - the PIIGS - by targeting not hard German machinery exports but something far more prosaic: French, Spanish and Italian wine.

Reuters reports that "in a step targeting southern European states such as France and Italy that back the duties but largely sparing north European opponents such as Germany, Beijing said it launched an anti-dumping and anti-subsidy probe into sales of European wine. The Chinese ministry said the government had begun the probe into EU wines at the request of Chinese wine makers.

"The Commerce Ministry has already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China's market by use of unfair trade tactics such as dumping and subsidies," it said in a statement.

 

"We have noted the quick rise in wine imports from the EU in recent years, and we will handle the investigation in accordance with the law."

 

The move appeared largely symbolic and less severe than if China had targeted hi-tech exports such as Airbus aircraft, made by Toulouse-based European aerospace group EADS.

 

Beijing imported 430 million liters of wine last year, of which more than two-thirds came from the EU, according to Chinese customs figures. Imports from France alone came to 170 million liters.

Short Diageo and Pernod?

China is the third biggest export market for French wines and spirits by value, worth 1 billion euros ($1.31 billion) in 2012 or nine percent of Paris' wine and spirits exports, according to the FEVS producers' federation.

 

Jim Boyce, who runs the wine blog grapewallofchina.com, said Chinese manufacturers have been upset about alleged dumping for a while.

It appears Spain's recent export stability is about to be monkeyhammered:

"The big issue was all this Spanish wine flowing in here at incredibly low prices," he said.

And should the trade war escalate, things are about to get far, far worse for Europe:

The European Union is China's most important trading partner, while for the EU, China is second only to the United States. Chinese exports of goods to the 27-member bloc totaled 290 billion euros ($376 billion) last year, with 144 billion euros going the other way.

 

Wine sales are only a fraction of overall exports to the rising Asian economic powerhouse but the move raises the risk of more tit-for-tat trade barriers.

 

The EU now has 31 ongoing trade investigations, 18 of them involving China. The largest to date is that into 21 billion euros of imports from China of solar panels, cells and wafers.

 

The EU says it has evidence that Chinese firms are selling solar panels below cost - a practice known as dumping. But the initial duty of 11.8 percent announced on Tuesday by European Trade Commissioner Karel De Gucht was far below the average 47 percent that had been planned.

 

China's Commerce Ministry said it took note of the lower initial rate, but called on the EU to "show more sincerity and flexibility to find a resolution both sides can accept through consultations".

Then again, in a centrally-planned world where the only "growth" is currency dilution who needs trade: Ben and Mario can just print it, right?

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Wed, 06/05/2013 - 07:54 | 3625691 Volaille de Bresse
Volaille de Bresse's picture

Merkel's playing her Chinese card against the rest of Europe which means the EU and its supposed solidarity is dead! Good riddance! We're back to European nations!

Wed, 06/05/2013 - 07:57 | 3625701 SoundMoney45
SoundMoney45's picture

Chinese consumers will continue to purchase European wine, as the Chinese government well knows.  This is really quite an odd response from China.

Wed, 06/05/2013 - 08:04 | 3625719 Pizza man
Pizza man's picture

HMMM...French or Italian wine VS Chinese wine? Not even a decision. That's one POS Chinese import we have been spared from seeing at our tables..so far.

Wed, 06/05/2013 - 08:59 | 3625860 Professor Fate
Professor Fate's picture

Chinese wine is actually quite good once you skim the small asbestos particles out and light it up to burn off any traces of lacquer thinner and turpentine.  Actually tastes a bit like a blend of Ouzo and Testor's Plastic Model Cement.

Fate the Magnificent

"Push the Button, Max" 

Wed, 06/05/2013 - 09:13 | 3625931 BigJim
BigJim's picture

To be fair... the Europeans are imposing sanctions because Chinese Solar is being sold 'below the cost of production' - given the EU's CAP, which amounts to subsidies for farmers, it seems perfectly reasonable for the Chinese to impose duties on EU wine for the same reason.

Of course, because we have governments that spend most of their time redistributing costs, it's hard to tell what the cost of production of any good actually is.

Wed, 06/05/2013 - 10:20 | 3626148 Sandmann
Sandmann's picture

The EU CAP costs about the same as US subsidies to agriculture

Wed, 06/05/2013 - 10:31 | 3626192 gmrpeabody
gmrpeabody's picture

"but largely sparing north European opponents such as Germany"

Divide and conquer....,

(China needs the machinery..., they have already stolen what the US had)

Wed, 06/05/2013 - 11:29 | 3626396 Manthong
Manthong's picture

“Chinese wine is actually quite good”

I particularly like the Shanghai River Valley Varietals…

They feature the spiciness of squeeze, with avian and swinish overtones and finish on the palate with a flourish of phosphates.

Wed, 06/05/2013 - 11:32 | 3626406 ParkAveFlasher
ParkAveFlasher's picture

The first word in my mind upon tasting was "smoggy" and "arsenic undertones".

Wed, 06/05/2013 - 12:17 | 3626528 merizobeach
merizobeach's picture

Good job, government of China; I fucking hate you, but punch 'em in their PIIGS, and you can't miss.

Wed, 06/05/2013 - 12:42 | 3626606 boogerbently
boogerbently's picture

They lie about everything. Their toys have lead paint, their drywall is lethal.

Who would ever trust a chinese food product?

Wed, 06/05/2013 - 20:19 | 3628121 StychoKiller
StychoKiller's picture

Hmm, do horses disappear when they produce "Swedish Meatballs?"

Wed, 06/05/2013 - 13:11 | 3626764 SilverRhino
SilverRhino's picture

Chinese wine ... making Australian table wines look great.  

http://www.youtube.com/watch?v=RbOZccv9ym8  

Wed, 06/05/2013 - 09:02 | 3625869 BigJim
BigJim's picture

The Chinese decided PIIGS winemakers were using uncompetitive practices, as the Europeans were not using grapes laced with cadmium, melamine, etc, etc.

Make me laugh! 

Wed, 06/05/2013 - 09:05 | 3625883 Lost My Shorts
Lost My Shorts's picture

Yes, Chinese wine, slightly acid with hints of chocolate and cadmium, and a melamine aftertaste.  They can keep it.

Notice the reference to French wines and spirits.  Let me assure you, there will be no increase in tarriffs on French Cognac.  The people who matter in China wouldn't like that.

Wed, 06/05/2013 - 09:54 | 3626078 malikai
malikai's picture

The people who matter in China aren't concerned with silly tariffs affecting their shopping habits.

Wed, 06/05/2013 - 09:16 | 3625948 EscapeKey
EscapeKey's picture

http://www.reuters.com/article/2011/12/14/us-china-wine-idUSTRE7BD1B220111214

(Reuters) - Chinese wines took the top four places in a China vs Bordeaux blind tasting competition on Wednesday, but it wasn't exactly a thrashing of the world's most elite wines by Chinese upstarts.

 

The wines were all red , mostly Cabernet Sauvignon-based Bordeaux-style blends. The Chinese side was represented by five of what are considered among the best Chinese wines produced; the French wines were five more pedestrian reds from Bordeaux negociants and commercial labels, not chateau-bottled wines.

Wed, 06/05/2013 - 09:56 | 3626084 malikai
malikai's picture

I've had a few of the domestic ones. Not all bad.

On par with your average grocery store quality stuff.

But then again, I've been known to drink wine from the bottle. So maybe I'm not one to listen to.

Wed, 06/05/2013 - 10:34 | 3626201 gmrpeabody
gmrpeabody's picture

"The wines were all red..."

ROFLMAO... good one!

 

Wed, 06/05/2013 - 14:16 | 3627022 Sokhmate
Sokhmate's picture

The wine was red, but was not red wine.

Wed, 06/05/2013 - 11:05 | 3626308 Boxed Merlot
Boxed Merlot's picture

I've been known to drink wine from the bottle...

 

What's this "bottle" you speak of?

Wed, 06/05/2013 - 12:44 | 3626616 boogerbently
boogerbently's picture

That's how "2 buck Chuck" is packaged !

Wed, 06/05/2013 - 12:53 | 3626673 tenpanhandle
tenpanhandle's picture

what's this "2 buck chuck" you speak of?  I thought he was the senator from new yawk.

Wed, 06/05/2013 - 13:29 | 3626842 Overfed
Overfed's picture

I drink mine right out of the box via a funnel! :-D

Wed, 06/05/2013 - 08:06 | 3625726 old naughty
old naughty's picture

Not that odd...when you think killin' 2 birds with one stone.

Back-handed pingpong ball to EU while 'front-hand' on local rice- and plum-wine consumption.

More 'freedom' to consumers after local businesses are 'encouraged' by the Premier.

Wed, 06/05/2013 - 08:10 | 3625734 maxmad
maxmad's picture

Why take out the strong legs, when you can easily knock off the weak legs first (with little effort) and will cause the whole table to come crashing down!!  Nice move Grasshopper!

Wed, 06/05/2013 - 08:31 | 3625776 kridkrid
kridkrid's picture

I think it's more than just that, though I agree.  If there is to be WWIII, Germany is kind of a wildcard, no?  China and Germany seem to be playing nice.

Wed, 06/05/2013 - 08:44 | 3625810 Sudden Debt
Sudden Debt's picture

It's art of war. Divide an conquer.

Attack the enemy where he's not.

The solar panel industry is mostly located in Germany.

It's brilliant!

Wed, 06/05/2013 - 09:11 | 3625920 Stuck on Zero
Stuck on Zero's picture

Absolutely.  China practices this with the U.S. It always retaliates against U.S. industries with the most Capitol Hill clout.  They are brilliant tacticians.  We are old and corrupt.  We either hang together or ...

 

Wed, 06/05/2013 - 08:49 | 3625821 Jdog
Jdog's picture

Wrong, if the Chinese government wants the trade war with Europe, no Chinese will buy their wine. Just like with Japan, the chinese are fighting with Japan over that tiny island, next thing you know, everyone was boycotting Japanese products and stop buying their junk.  The government is in control in China, not the people. 

Wed, 06/05/2013 - 10:38 | 3626211 gmrpeabody
gmrpeabody's picture

The animosity goes way back before that little island...

Wed, 06/05/2013 - 14:38 | 3627113 Herd Redirectio...
Herd Redirection Committee's picture

Indeed, a certain 'Rape of Nanjing' is still bitterly resented. 

Wed, 06/05/2013 - 20:22 | 3628131 StychoKiller
StychoKiller's picture

Indeed, long ago, the Chinese fleet was wiped out by a Kamikaze (divine wind).

Wed, 06/05/2013 - 14:01 | 3626964 twh99
twh99's picture

Or they might buy more Californian wine.

Wed, 06/05/2013 - 07:57 | 3625702 GetZeeGold
GetZeeGold's picture

 

 

Aside from a couple lawyers and banksters....I don't think anyone in Euroland would shed a tear about the EU's death.

Wed, 06/05/2013 - 09:06 | 3625892 123dobryden
123dobryden's picture

well the problem is that EU took a nice things like free movement of capital, goods and services and is shit out a overregulated, costly and competitivness loosing bureaucratic shit....

 

Do we need bureaucrats for FREE movement of those things, we need roads, trains, trucks and logistic for that, not an Army of unpaying taxes shitbags with pay grades of Michael Jordan, that cant even write their own legislation that they are supposed to get paid for, instead it is emailed to them by corporate fucks.

 

EMU took the nice thing as single currency and unable to step to their own legislation, breaking every single paragraph of their own treaty, shit out their own obituary unwillingly, what a showcase of competence.

 

Sadly there is only one country on the palnet walking the right direction, Iceland, but we cant all go there, can we?

Wed, 06/05/2013 - 07:58 | 3625708 swiss chick
swiss chick's picture

I hope you are right...

Wed, 06/05/2013 - 08:21 | 3625759 samcontrol
samcontrol's picture

solar panels have silver...i,m fucked again!

Wed, 06/05/2013 - 07:55 | 3625692 BudFox2012
BudFox2012's picture

First the start currency wars, then trade wars, then world wars.
- Gerald Celente

Wed, 06/05/2013 - 08:00 | 3625714 kridkrid
kridkrid's picture

Frederic Bastait said it 150 years before Gerald Celente.

Thu, 06/06/2013 - 02:02 | 3628862 matrix2012
matrix2012's picture

Lindsey Williams: Whenever there comes a crack in the derivative market, you will know that the collapse in the financial market is ready to take place.

How can an average person know when a crack comes in the derivative market? There are four items that when you see them take place, you will know the collapse is occurring.

First, there will be currency wars.

Second, there will be trade wars.

Third, there will be an abandonment of the SWIFT system for monetary transfers.

And the last sign to determine the crack in the derivative markets, and the initiation of the economic collapse will be when the Federal Reserve begins to raise interest rates.

Wed, 06/05/2013 - 07:56 | 3625694 ParkAveFlasher
ParkAveFlasher's picture

Cheap Lafite, bitchez!

Wed, 06/05/2013 - 09:04 | 3625882 BigJim
BigJim's picture

Yes, time to short Euro winemakers, amybe time to go long Australian ones

Wed, 06/05/2013 - 09:52 | 3626066 Zero Point
Zero Point's picture

If they won't buy red dirt, we'll sell 'em red wine.

And stuffed koalas made in China.

Wed, 06/05/2013 - 07:56 | 3625696 Oldwood
Oldwood's picture

France and Italy will need all the booze tbey can get to maintain their current delusions.

Wed, 06/05/2013 - 08:00 | 3625698 francis_sawyer
francis_sawyer's picture

You keep your defective solar panels... We'll sit here, drink, & mull things over for awhile... Besides ~ who needs solar panels when you have unelected 'perpetual motion' windbags running the EU...

Wed, 06/05/2013 - 07:57 | 3625700 Quinvarius
Quinvarius's picture

I think China went easy on them.  Probably due to the fantastic deal they are getting on all of the West's gold reserves.  Don't want to close of the trade too much.  Cheap gold now is like getting free oil in a couple years.

Wed, 06/05/2013 - 08:11 | 3625738 ParkAveFlasher
ParkAveFlasher's picture

What else does France export globally?  Wine is a major profit center for the economy.  I imagine many a Frenchie salivated at the prospect of 500MM new wine drinkers.

Wed, 06/05/2013 - 08:16 | 3625748 Sandmann
Sandmann's picture

GE jet engines CFM56 as used in KC135.  Nuclear power plants. High Speed Trains. Weapons Systems. Electricals. Chemicals. Cars. Pharmaceuticals.

 

http://www.worldsrichestcountries.com/top_us_exports.html

http://www.worldsrichestcountries.com/top_us_imports.html

Wed, 06/05/2013 - 09:05 | 3625889 BigJim
BigJim's picture

Yes, people forget France is actually a modern, developed country.

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