July 15. 2024. 6:58

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EU, China and pigs in the middle

China’s move to launch an investigation into EU pork imports is misguided and Bejing may come to regret it, writes John Clarke.

China confirmed European producers’ worst fears yesterday when it announced the launch of an anti-dumping investigation into imports of European pork.

Chinese officials made no secret that the launch was in retaliation against Europe’s imposition last week of higher than anticipated anti-subsidy tariffs on imports of Chinese Electric Vehicles (EVs): up to 38% duty on top of the existing 10% applied to all imported cars.

It was also a warning: negotiate a lower duty or removal, or expect swingeing tariffs on your €3 billion pork exports.

On the surface, the move was a clever one. The duties are not yet in place: it’s just an investigation for now, so a Damoclean sword is held over the sector as long as the EU refuses to negotiate EVs.

The values and volumes are calibrated to cause some damage but targeting just one sector is not going to trigger a full-blown trade war – which would have been the case had China made good on its threats to add dairy products, wine, or even Airbus.

And China presumably calculated it would be smart to penalise member states who were either unaffected by or not particularly supporting the EV case: Spain, Netherlands and Denmark are currently the biggest pork exporters to China.

But in this author’s view, China’s move is misguided, and it may come to regret it.

First, the investigation was triggered by a request from the domestic industry. Knowing how intertwined government and industry are in China – “as close as lips and teeth” as the Chinese proverb has it – it is hardly fanciful to imagine that China’s government instructed industry to lodge the request.

It is common knowledge that Beijing has a metaphorical drawer of oven-ready AD requests ready for use if political circumstances so warrant.

China has taken great pains in recent years to replace a vacuum left by the USA, by arguing that they are reliable multilateralists, wedded to the rule of law.

An anti-dumping case (along with vague allegations of distorting subsidies) launched for purely political and tit-for-tat retaliatory reasons hardly inspires confidence in China’s attachment to those multilateral principles.

Quite the opposite, it blows their narrative out of the water. Trust, once gone, takes an aeon to restore. In this month of the Euro championship, that’s an own goal for China’s longer-term aims.

Two, the move will not have the desired deterrent or leverage effect. Spain, the Netherlands and Denmark are unlikely by themselves to be able to swing EU decision-makers against the imposition of definitive EV duties, expected early next year.

Wrong victims. Germany and France should have been the targets if that is China’s objective.

And ironically, there may be some Europeans even condoning any Chinese measures. Environmentalists and animal welfare activists may well welcome a reduction in pork production consequent on the closing of the Chinese market.

Three, one must question the systemic wisdom of targeting a sector wholly unrelated to the original dispute.

WTO law and practice assumes retaliation – where legal – to be focused where possible on the sector under dispute. Cars for cars, planes for planes, and so on. To routinely take unrelated sectors hostage in trade disputes is a risky policy with unforeseen consequences.

And last, is it wise to target commodity foodstuffs, notably in a country like China, for which food security is a perennial preoccupation?

The last ten years have taught us the importance of diversifying as much as possible our food sources, not restricting them.

Another own goal – and a bad precedent. Even the EU excluded food from its Russia sanctions list.

Food politics is fools’ politics. Food relies on long-term contracts between supplier and buyer.

So China would be advised to reconsider the announced measure, and thus send a signal that China is a reliable trading partner, give some respite to Europe’s equally reliable pork producers, and respond to its own consumers’ appreciation of the safety and quality of Europe’s pork.

In short, don’t make a pig’s ear of it.

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