Wine riposte to Europe first move in judicious response （Zhao Yongsheng）

China hit back at European wine exports on June 5 in response to the EU's decision to impose the anti-dumping duties on solar panels, as tensions mounted between two of the world's biggest trading partners, according to media reports.

EU trade commissioner Karel De Gucht announced the solar panel duties 24 hours earlier than previously expected, and the Chinese reaction was unexpectedly quick. This demonstrates that both sides were well-prepared and that multiple solutions were rehearsed for this collision.

It is rather difficult for us to disregard the serious scenario that an EU-China trade war, which both sides had tried to avoid, seems to be triggered by the trade commission this time.

How can we understand the European Commission's (EC) decision this time? I believe the commission's announcement cannot be justified because it is an anti-democratic action.

De Gucht completely ignored the opposition from 18 EU nations among the 27 member states, violating a fundamental decision-making principle within the EU.

One substantial explanation can be that discord within the EU has resulted in inconsistent voices. Another possibility is that the EC and EU members are looking to gain greater bargaining power with China by showing different attitudes over the dispute.

Honestly speaking, individual nations in the EU, even those as big as Germany, are afraid of countermeasures from China, so major interested parties opposed the duties.

On the contrary, facing the EC's aggression this time, the Chinese "riposte," though bizarrely quick, is in my opinion justified and moderate.

It is moderate because the EU now has 31 ongoing trade investigations, 18 of them involving China, and the largest to date is into $28 billion of imports from China of solar panels, cells and wafers.

In contrast, EU wine exports to China reached 257.3 million liters in 2012 for a value of only nearly $1 billion.

The Chinese riposte is also well focused. This time China is targeting southern European states but largely sparing northern European states such as Germany because the main representatives of states backing the duties are southern states such as France and Italy; Spain abstained on the solar panel duties, but this is still counted as a vote in favor under actual EU rules.

France is the first target, as more than half or 139.5 million liters come from the country, and China is the third biggest export market for European wines and the fastest growing, as a rising middle class enjoys the pleasures and status of sipping fine Bordeaux or quaffing Rioja. The data shows that around a quarter of Bordeaux wine exports are made to China.

We can imagine the immense impact that will have on this region. That's why France's trade ministry condemned the Chinese move as "inappropriate and reprehensible," accusing Beijing of opening a new front in an unrelated area, and French President François Hollande called for a meeting of the 27 EU member states to show their solidarity on trade issues.

Nevertheless, the Chinese response is far from being sufficient. European wine is likely just the start of further Chinese responses. Quantitatively speaking, China has to impose the same pressure on its European counterparts, and hit at least $28 billion worth of trade

After the wine, more pillar sectors are expected to be hit so as to maintain pressure on the EU. However, anti-dumping and anti-subsidy probes are not the long-term solution, although they are important and especially necessary for China in the short or even medium run.

Therefore, how to deal with the EU-China trade frictions such as solar panels and other products will be a real puzzle for decision-makers on both sides, because only with a sustainable EU-China trade relationship can these two large economies ensure the "win-win" trade model.

The "win-win" model is good, but not always feasible. In the case of serous frustrations, a "lose-lose" model can be easily mentioned. But "lose-lose" can be used only as a threat, hopefully not put into practice.

（Contant Zhao Yongsheng：jacques.zhao@163.com）