China has launched a new anti-dumping investigation into French brandy imports, intensifying the trade dispute between Beijing and Brussels.
Chinese Commerce Ministry officials said China’s investigation into brandy imported from the EU was carried out following complaints from domestic manufacturers. Brandy is the most imported distilled spirit in China, mainly from France.
The investigation comes four days after European Commission President Ursula von der Leyen announced an anti-subsidy investigation into imports of Chinese electric vehicles, with the support of French car executives and officials. It took place a month later.
“The world market is now flooded with cheap Chinese-made electric cars,” she said in September. At the time, the city of Brussels warned of possible retaliation by China.
Shares of the major liquor producers fell on Friday, with Rémy Cointreau down more than 12% and Pernod Ricard down 5%. Shares in luxury goods group LVMH, which owns Diageo and Hennessy cognacs, also fell 1.5% and 1.7% respectively.
French cognac industry association BNIC said it would “fully cooperate with the Chinese authorities” to address their concerns.
“Our products and business practices are fully compliant with Chinese and international regulations. [the] “The EU and China will find a constructive way to resolve the bilateral dispute.”
Pernod Ricard, which owns the cognac brands Martell and Ogier, has leveled import duties on the alcoholic beverage by increasing it to 16% from the current rate of about 5%, in a lawsuit filed with Chinese trade authorities by an anonymous domestic producer. He said that he argued that it should be changed. Arena. Although such increases are significant, they are lower than similar tariffs in other countries, such as Brazil’s 20% import tax, Vietnam’s 24%, and Thailand’s 60%.
“This level is significantly lower than levels used in other methods.” [anti-dumping] “We are conducting an investigation,” the company said, adding: “This investigation is being carried out in the context of trade agreements between the European Union and China regarding other industrial sectors that are unrelated to our activities.” .
European Commission trade spokesperson Olof Gil said: “We are currently assessing the documents we have received and will work closely with the EU industry concerned and intervene in the framework of the investigation if necessary. ” he said.
The city of Brussels has launched several other investigations into China’s alleged unfair trade practices in recent months, imposing punitive duties on imports of bottle plastic and launching an investigation into alleged dumping of biofuels. are doing.
Von der Leyen complained about the region’s record trade deficit with China – approaching 400 billion euros in 2022, according to the latest figures released – and sought to de-risk the relationship and replace key products. He led calls to find a source of supply. The commission also recommends tightening national regulations on investment and exports.
The Chinese government has strongly criticized the EU over the investigation, saying late last month that it firmly opposes “protectionist practices” and “abuse of trade remedies.”
The Commerce Department said Friday that the Brandy investigation should be completed within a year, but could be extended for another six months.
“This . . . is just a warning shot,” said Hosk Lee Makiyama, director of the Brussels think tank Esipe. “The EU isn’t actually doing anything.” [on EVs]. Big things are yet to come. ”
China imported approximately $4.5 billion worth of alcoholic beverages in 2022, according to Daxue Consulting, a China-based market research group. This included approximately 37.5 million liters of French brandy.
Sales of premium spirits, especially cognac, were already under pressure this year as pandemic-era drinking habits and the lack of vibrancy in bars that reopened after lockdown.
LVMH, Remy Cointreau and Pernod Ricard all reported declines in cognac sales in their third-quarter results, largely due to weaker demand in the United States.
China is another major market for cognac and was expected to help balance weak sales in the United States as it continues to recover from strict coronavirus lockdowns.
According to the cognac producers’ association UGVC, cognac export volumes decreased by 18.9% from August 2022 to the end of July 2023. The United States is by far the largest consumer of the drink, importing more than half of the bottles produced, with China in second place, according to the Cognac National Bureau of International Specialization.
Bernstein spirits analyst Trevor Sterling said cognac producers would be adversely affected by tariffs on exports to China. “This problem is unlikely to be resolved anytime soon,” he says. “This impact will remain in the industry for at least six months.”
In parallel with the EU investigation, France has taken its own measures to promote European-made products. A government ordinance to be announced this month will limit subsidies for the purchase of electric cars, making them inapplicable to most cars made in China based on their environmental performance.
Additional reporting by Wenjie Ding in Beijing, Andy Bounds in Brussels and Sarah White in Paris