Two days after the E.U. said it was imposing its first countervailing anti-subsidy duties against China, on coated fine paper, the Ministry of Commerce says China will apply anti-subsidy duties in respect of E.U. subsidies given to potato starch products. Unlike many of the tit-for-tat trade retaliations between China and the U.S., both moves are commercially significant, and will exacerbate the political tension between the two.
China-E.U. trade has been growing rapidly, reaching $480 billion in 2010, but, as China’s exports start to move up the value-chain, under the E.U.’s newish hard-line trade commissioner, Karel de Gucht, Brussels is now focusing on what it perceives to be Chinese subsidies that result from a range of policies from direct state financial support to indirect assistance such as favorable borrowing terms and land grants. This could get very rocky.