China pressures France in wine row despite EU deal

Fri Dec 13, 2013 8:39am EST

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By Francesco Guarascio

BRUSSELS, Dec 13 (Reuters) - China is pressing ahead with an investigation into French and Spanish wine exports despite a deal with the European Union to defuse trade tensions, creating unease about Beijing's intentions.

Beijing began an inquiry in July into whether Europe was selling wine in China at unfairly low prices with the help of subsidies. That was widely considered to be retaliation for an EU move to impose punitive duties on Chinese solar panels.

The solar panel case was by far the largest trade dispute between Brussels and Beijing, but they reached an agreement to avert duties. EU officials said they had received reassurances the wine inquiry would also be dropped.

Then Beijing caused confusion by sending a 45-page questionnaire in Mandarin to France, Spain and the European Commission, which handles trade for the EU's 28 countries, officials and diplomats said. Beijing also set a tight deadline: it sent the questionnaire Nov. 28 and wanted replies by Dec. 19.

Resolving disputes amicably is a key to improving trust between two of the world's biggest markets. The EU is China's most important trading partner; China is second only to the United States for Europe. Their relationship is delicate, as both sides try to protect industries that increasingly compete.

Brussels and Beijing opened negotiations on a so-called investment pact last month to improve access to each other's markets. Many EU leaders, including British Prime Minister David Cameron, see it as a forerunner to a free-trade deal.

The wine investigation could also represent a negotiating tool for China in a separate dispute over telecoms.

The Commission told Beijing in May it was ready to open an anti-dumping and anti-subsidy investigation into Huawei , the world's number two telecoms equipment manufacturer, and ZTE, the world's fifth largest. China is the world's biggest importer of Bordeaux, and consumption soared 110 percent in 2011. France called China's decision to consider duties on its wine "inappropriate and reprehensible".

EU wine exports to China excluding Hong Kong, which EU officials said was not covered by the investigation, reached 257 million litres in 2012 for a value of nearly $1 billion. More than half came from France.

China-based European companies in the wine business held a first meeting in November to tell Beijing that EU exports respected the norms of world trade and there was no dumping. They expect to meet again in February, officials said.

Some people close to the talks suggested that having launched an investigation, China's inquiry may just be running its course over the legally established 12-month period, which can be extended six months up to the end of 2014.

But there were also questions about why Italy, one of Europe's biggest producers, had not been sent the questionnaire. (Writing by Robin Emmott; Editing by Larry King)

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