The Ministry of Commerce takes anti subsidy measures against EU dairy products

This week, the Ministry of Commerce announced a preliminary ruling on the anti subsidy investigation of imported dairy products originating from the European Union, determining that the above-mentioned products have subsidies and that the domestic dairy industry in China has suffered substantial damage, and there is a causal relationship between subsidies and substantial damage. According to the suggestion of the Ministry of Commerce, starting from December 23, 2025, the State Council Tariff Commission will implement temporary measures in the form of a temporary anti subsidy tax deposit. The spokesperson of the Ministry of Commerce, in response to a reporter's question about the preliminary ruling, introduced that on August 21, 2024, the Ministry of Commerce launched a countervailing investigation in response to the application of the China Dairy Industry Association and the China Dairy Industry Association. According to the preliminary ruling, the ad valorem subsidy rate for EU companies is 21.9% -42.7%, and the Ministry of Commerce has decided to implement temporary anti subsidy measures. What impact does the subsidized import of EU dairy products have on China's domestic industry? Liu Changquan, a researcher at the Institute of Rural Development of the Chinese Academy of Social Sciences and director of the Industrial Economics Research Office, stated in an interview with First Financial News that China's dairy industry is currently facing a severe situation, which is closely related to the impact of imports. The price advantage formed by subsidies for EU products entering the Chinese market has had a significant impact on domestic production, "said Liu Changquan. Against the backdrop of China's consumption upgrading and increasing demand for deep processed products, domestic industries lack scale and cost advantages, making it difficult to compete with international products in the initial stage. The impact of imported products after subsidies on the domestic industry is causing unprecedented difficulties for China's dairy industry. Liu Changquan summarized the challenges faced by the domestic dairy industry into four "most". Firstly, the price of raw milk has been continuously declining for over 40 months, which is the longest period of decline in history; Secondly, the current nominal acquisition price has dropped to the level of over a decade ago, and if inflation is taken into account, the actual price is at its lowest point in history; Thirdly, the industry is facing the largest scale of losses in history. According to a survey on the national dairy industry technology system's "radiation farms" (i.e. sample farms within the system), the loss rate of farms in the first half of the year was about 60%. If the already withdrawn farms are included, the actual loss and withdrawal ratio may be as high as 80% to 90%. Fourthly, compared with other sectors of animal husbandry, the dairy industry is currently the most prominent area facing difficulties. Liu Changquan further explained that the current predicament is the result of multiple intertwined factors, which are not only influenced by internal factors such as slowing domestic consumption growth and temporary overcapacity, but also closely related to external import shocks. New Zealand, due to its natural cost advantage, has to some extent replaced domestic demand with low-priced raw milk. The European Union, on the other hand, mainly provides price advantages for its deep processed dairy products through subsidies, directly impacting the growing dairy industry in China. He added that in recent years, the consumption growth of dairy products has shown structural characteristics, and new formats such as tea drinks have driven the rapid increase in demand for products such as cream and cheese. However, the domestic related industry foundation is originally weak and is in the cultivation period. The large-scale import of similar products that have gained price advantages through subsidies directly inhibits the formation and development of the domestic processing industry chain. Liu Chang's full name: "Subsidies are not only an important component of EU dairy farmers' income, but also directly stimulate production. Without subsidies, some producers may withdraw from the industry; while subsidies encourage them to maintain or expand production. As a significant portion of EU output is used for exports, the products that are increased by subsidy incentives will have an impact on related industries in other countries when they enter the international market

The implementation of this temporary anti subsidy measure is seen as a crucial step for domestic industries to gain breathing space and strive for a window of opportunity for industrial growth. After the Ministry of Commerce issued the preliminary ruling, the China Dairy Industry Association and the China Dairy Industry Association successively issued statements expressing their strong support. The China Dairy Industry Association stated in a statement that in recent years, some EU dairy products have entered the Chinese market in large quantities at unreasonable prices, relying on its domestic subsidy support. This has had a sustained impact on key sub sectors such as cream and cheese in China, resulting in a decrease in production capacity utilization and increased operational pressure for relevant domestic enterprises, seriously damaging the fair competition environment. The association believes that this preliminary ruling and temporary measures comply with WTO rules and Chinese laws, and are "conducive to curbing unfair trade practices, reducing the impact of imported subsidized products on the domestic industry, creating a more fair, transparent, and predictable market environment for domestic dairy enterprises, and having important significance in boosting industry confidence and promoting high-quality development of the industry." The China Dairy Association also stated that the relevant measures taken will help alleviate import shocks and boost industry confidence. Liu Changquan stated that during this industry downturn, the low price of raw milk has objectively created development conditions for some emerging processing enterprises. A group of enterprises focusing on deep processing products have emerged, and they use low-cost raw milk to produce products such as cream and cheese, with good market feedback. If there were no excessive import shocks, domestic enterprises would be fully capable of gradually meeting the growing demand. Liu Changquan believes that through trade remedy measures such as subsidies, the pressure of imports on domestic deep processing industries can be alleviated to a certain extent, providing a key development window for emerging enterprises. We have observed a trend from the actual data of some enterprises: when the production scale reaches a certain level, accompanied by continuous improvement of production processes and diversified product development, the comprehensive utilization of raw milk by enterprises will significantly increase. For example, if only raw milk is used to produce cream, other by-products cannot be effectively utilized, and production costs will be difficult to cover; on the contrary, if multiple products such as cream, cheese, protein powder, etc. can be processed simultaneously, the overall cost can be effectively diluted, "he explained. He said that if domestic processing enterprises can seize the current policy window period, enrich product lines, deepen processing levels, and improve comprehensive utilization efficiency, they have the opportunity to significantly reduce production costs. On this basis, even in the face of competition from imported products in the future, enterprises will be better equipped to cope. In fact, some companies are able to digest cost pressures and maintain market competitiveness even when the purchase price of raw milk has increased after improving their deep processing level. Liu Changquan added that the significance of this anti subsidy measure is not simply "protection", but a correction to the long-standing industrial subsidy policy of the European Union. Of course, it is only a preliminary round at the moment, and we will wait and see for the final round in February next year. The EU has provided high-level subsidies and support to its dairy farmers, which constitutes a long-term unfair competition starting point in the international market, "Liu Chang said in full