BRUSSELS — It’s crunch time.
The European Commission is days away from concluding an investigation into Chinese state aid to its booming electric vehicle industry. And Beijing is warning that any import tariffs that the EU imposes will trigger a swift response, vaulting beyond a mooted levy on French brandy imports to hammer European agriculture as a whole.
Pork and dairy are first at the plate, according to the state-owned Global Times. Over the last two weeks, it has reported that the Chinese government is considering anti-dumping probes into imports of both foods, which in 2023 accounted for nearly €5 billion — a quarter of EU agri-food exports to the Asian giant and 2 percent of total exports.
Outgoing Agriculture Commissioner Janusz Wojciechowski has repeatedly said he doesn’t want the sector getting entangled by trade spats, leading a utopian trade promotion mission to Beijing in April. But it looks increasingly likely the Chinese will pull the trigger on agrifood.
So how worried should European farmers be?
“The Commission needs to make sure that we don’t pick up the bill for this dispute,” said Ksenija Simovic, senior policy adviser for trade at Copa-Cogeca, Europe’s largest farmer lobby. “We don’t like to get caught in the crossfire.”
Talk to the pork exporters and they’ll go even further, squealing that it’s a catastrophe.
“The Chinese market is so crucial for the European pork sector. One reason is the size China has: The sheer volume of the Chinese market is so big, that no one can ignore” it, said Joris Coenen, manager at the Belgian Meat Office, an export coordinating body.
China’s 1.4 billion consumers love pig meat and eat more of it than the rest of Asia and Africa combined.
“The second reason … is that we can sell products at the kilo price in China that in the internal market are practically considered waste — the byproducts, what we call the ‘offal,’” Coenen told POLITICO. Western consumers don’t eat snouts and ears and tails, but in China these products, which account for a fifth of carcass weight, can sell for more than hams and loins.
Mass and unusual appetite are a winning combo, attracting meat producers everywhere.
Cheaper Brazilian and U.S. protein is already cutting into Europe’s margins, complained Coenen, and EU producers can’t easily redirect volume to emerging markets like Vietnam and the Philippines. Duties are currently 12 percent. Hoist them to 20 percent and exporters are in trouble.
Piggybacking
But context is important too. Only a tenth of Europe’s pork leaves the bloc, of which less than half goes to China.
Beijing-bound exports of pig meat topped €7 billion in 2020, after an epidemic of African swine fever (ASF) forced the country to cull one-quarter of its herds, yet plummeted to under €3 billion last year, as animal populations recovered and people ate less meat during a cost-of-living crisis.
Tariffs or not, the uncompetitive prices of European pork mean that figure will drop again this year, according to Commission estimates.
In threatening higher pork duties, Beijing is also “piggybacking”: trying to profit from a step they might take anyway due to domestic oversupply, said Jacob Gunter, lead analyst on economy for the Mercator Institute for China Studies (MERICS).
“This may be a good way for them to stabilise pork prices at home,” he mused.
Pushed pork
The situation is better for dairy. EU exports were fizzing for a time, but have since become sluggish. China’s “importance in terms of volumes has decreased over the past years,” particularly for milk, while it buys a mere 0.6 percent of EU butter production and 0.3 percent of cheese, according to Laurens van Delft, director of trade and economics at the European Dairy Association.
Push past that and it gets even rosier. The EU’s biggest category for agri-food shipments to China is processed cereals, like flour and starch, with unprocessed cereals, like wheat and corn, being the fourth biggest. Together, they accounted for over €4 billion last year — one-quarter of exports.
Yet Beijing is already looking to finalize its near-complete self-sufficiency in grains, with its first “food security law” taking effect last week. The strategy “puts China first” by importing moderately and using scientific and technological advances to boost output.
And don’t forget alcohol, one of the smoothest moneymakers. Spirits have received the most attention since January, when China began an anti-dumping probe clearly aimed at French cognac and armagnac — retribution for Paris’ backing for the EU’s own probe of Chinese electric vehicles.
Yet European wine shipments raked in twice as much as liquor did last year. It could have been more except Chinese wine consumption has spilled 60 percent since 2019, according to a recent report by the International Organisation of Vine and Wine (OIV).
Given that politicians are still wincing at the memory of this year’s spate of farm protests, Beijing has been smart to menace agriculture so close to a European parliamentary election, argued Gunter at MERICS.
“Farmers always vote and they’re very sensitive to even small disruptions in the prices of what they’re selling,” he said. But with trade volumes falling, kowtowing to Beijing won’t make as much of a difference as it would have a few years back.
This story has been updated.