(Yicai) Dec. 29 -- China's recent decision to impose countervailing measures on dairy imports from the European Union is a legitimate market defense designed to offset the market distortions caused by unfair EU subsidies, an international trade expert told Yicai.

China’s anti-subsidy investigation, which was launched in August last year, strictly adheres to domestic laws and regulations as well as the World Trade Organization's Agreement on Subsidies and Countervailing Measures, giving it a solid legal foundation, said Zhang Xiaopeng, an academic at the industrial research department of the Shanghai Institute for Openness Strategy Research. This approach is fair, lawful and fully compliant, he added.

The EU, through its Common Agricultural Policy, provides dozens of subsidies that allow European farms and dairy companies to remain profitable even when global milk prices are low, enabling them to export to China at below cost price, Zhang said.

These subsidies not only hurt China's dairy sales but also hinder the domestic industry's transition towards higher-end and more processed products, Zhang said. The countervailing probe mainly targets cheese and high-fat cream, which are key areas for China's dairy industry as it tries to upgrade and add value to its products, he added.

China’s Ministry of Commerce will impose temporary countervailing duty deposits on certain dairy products originating from the EU, including fresh cheese, processed cheese and cream, starting Dec. 23, the ministry said on Dec. 22.

Preliminary findings show that these EU imports receive subsidies and that China’s domestic dairy industry has suffered substantial harm, the ministry said. Furthermore, there is a clear link between the subsidies and the damage.

In recent years, China has been more restrained than the EU in both the number and scope of anti-subsidy investigations, Zhang said. For example, the EU has recently abused the Foreign Subsidies Regulation to launch surprise inspections and in-depth probes targeting Chinese companies, which has evolved into a tool for trade discrimination. In contrast, China's dairy product investigation is strictly limited to specific products and follows standard WTO procedures for trade remedies.

Chinese authorities have always been willing to address trade disputes through dialogue, Zhang said. For example, in the final ruling on anti-dumping measures against EU pork that was made this month, China significantly reduced the duties, demonstrating a genuine effort to ease tensions, he added.

Editors: Dou Shicong, Kim Taylor