BRUSSELS — The European Commission has taken the first steps to challenge China's anti-subsidy investigation into some of the bloc's dairy exports, arguing it is based on "questionable allegations and insufficient evidence" and urging its immediate end.

The announcement on Monday morning paves the way for consultations at the World Trade Organization (WTO) to settle the dispute before it escalates any further.

The Chinese probe – requested by two state-backed industry groups – was launched in late August by the Commerce Ministry and targets EU subsidies in the production of fresh and processed cheese, blue cheese and other cheese, milk and cream products. Eight member states – Austria, Belgium, Croatia, the Czech Republic, Finland, Ireland, Italy and Romania – came under the ministry's scrutiny.

The move was widely seen as a tit-for-tat as it came less than 24 hours after the Commission updated its proposal to slap additional tariffs of up to 36.3% on imports of China-made electric vehicles (EVs), following a nine-month inquiry.

Brussels has accused Beijing of lavishing its EVs with subsidies to artificially lower their retail price and push European firms out of the lucrative market. The proposed duties, which vary according to brand, are supposed to offset this financial disadvantage and ensure fairer competition between EU and Chinese EV producers.

From the onset, Chinese officials have strenuously contested the Commission's findings, calling them a "naked protectionist act" that "constructed and exaggerated the so-called subsidies." The country gradually began several probes into sensitive EU exports, such as dairy, pork and brandy, raising fears of an impending trade war.

Behind the scenes, however, Beijing has sought to achieve a negotiated solution to the EV dispute and shield domestic companies from the steep tariffs, which would come on top of the existing 10% rate.

This effort was on full display last week when Valdis Dombrovskis, the Commission's executive vice president in charge of trade, met with Wang Wentao, China's minister of commerce, in Brussels. Although the meeting failed to deliver a breakthrough, both sides agreed to intensify talks. Member states are expected to hold a make-or-break vote on the EV proposal before the end of October.

Monday's announcement makes it clear that, despite the diplomatic push, tensions remain high. In its press release, the Commission denounces Beijing's "abusing proceedings" and vows to protect the Common Agricultural Policy (CAP), the multi-billion subsidy program for EU farmers.

"The Chinese investigation on EU dairy is based on questionable allegations and insufficient evidence, therefore we will continue to challenge it vigorously in all available venues, while calling on China to bring it immediately to an end," Dombrovskis said.

According to the Commission, this is the first time the executive has called for WTO consultations in the first stage of an anti-subsidy investigation.

Reacting to the news, the European Dairy Association (EDA), the lobby representing the bloc's milk-processing industry, welcomed the Commission's initiative and said the Chinese probe had caused an additional administrative burden for producers.

"For European cream and cheese, we're once more a 'hostage' of a non-related trade dossier," said Alexander Anton, EDA's secretary general. "We count on the EU Commission to make sure that we will not become collateral damage of the trade tensions between our Union and the People's Republic of China."

Last year, the EU exported €1.76 billion in dairy products to China, down from €2.08 billion in 2022. Among member states, Ireland was the leading exporter. — Euronews