Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
China has hit the EU’s soft underbelly in its fight over electric vehicle imports: pork. Poultry and beef could be next — especially chicken feet and other bits that Europeans do not tend to eat, but depend on selling.
It is a telling choice by Beijing. Food and drink are these days among the few products that China buys more of than it sells to the bloc, and they have been the first in the line of fire as Beijing retaliates over antisubsidy tariffs of up to 38 per cent on electric cars.
This shift underlines how the EU-China trade relationship has been turned on its head since Beijing joined the World Trade Organization in 2001. China has moved up the value chain fast, becoming a research and development powerhouse at the centre of global supply chains. Its trade surplus with Europe has ballooned in advanced equipment such as batteries, solar panels and cell phones.
The EU, meanwhile, still sells lots of cars and aircraft. But increasingly its strength is serving China’s 1.4bn consumers with more traditional consumer fare: cheese, wine and handbags.
The trade defence team in China’s fearsome commerce ministry are not just experts at feisty rhetoric. They have laser sights trained on vulnerable areas of the EU body politic, where one shot can trigger howls heard very quickly in parliaments and therefore governments.
The target chosen was an antidumping investigation into EU pork imports worth €2.5bn a year, including offcuts such as bung that feature in Chinese cuisine. Farmers, a particularly vocal and influential pressure group with form on noisy protests, know they have few other alternative markets.
Some animals are only profitable because the farmer can sell the “fifth quarter” — such as the head, tail and internal organs — to the Chinese. Chicken feet, thrown into the bin in many a French boucherie, are a particular delicacy.
Beijing has already opened an investigation into alleged dumping of brandy that would mainly hit France, which pressed European Commission president Ursula von der Leyen to levy the vehicle tariffs.
Hosuk Lee-Makiyama, a director of the European Centre for International Political Economy in Brussels, said he also expects “retaliation in dairy, cheeses and other food items that are typical export staples for France and Italy”.
The trade surplus in food and drink was around €6bn in 2023, a sixfold increase in a decade. In that time European farmers have increased their flocks to serve this burgeoning market as domestic subsidies are cut back.
John Clarke, the former chief agricultural trade negotiator for the European Commission, said the Chinese were well aware of the sensitivities after more than a year of farm protests over falling incomes. He thinks drinks could come next.
Removing these barriers will also come at a price. “When a European leader goes to Beijing to get the market reopened for steak they have to give a gift in return,” Clarke said. “We sell them the port of Piraeus [in Greece], they buy feta cheese and yoghurt.”
The problem for Brussels is that there is not much the EU could block in return. It is almost totally reliant on Chinese solar panels and does not want to increase the cost of going green. It also needs Chinese-made batteries for its own electric vehicles.
Under US pressure, the Netherlands has ended exports of advanced chipmaking machines, but cutting supplies of Hermès scarves is unlikely to bring the Chinese economy to its knees.
Guillaume Derrien, economist at BNP Paribas, points out that the days of Europe just buying cheap Chinese toys are long gone. “They now import more phones and motor vehicles: these two segments accounted for 17 per cent of EU imports from China in 2023,” he wrote in a recent note.
China has gone by the book with the pork investigation, which leaves it open to an appeal at the WTO if it determines there are subsidies.
A more ruthless alternative would be to hit European products for allegedly falling short of food safety standards. China banned beef from many EU countries for more than 20 years after a foot-and-mouth outbreak in 2001, for example. Some pork has been blocked since 2019 because of African swine fever.
There are limits to how much China can use pork for leverage in trade disputes. “Food is too important to be taken hostage,” Clarke said. “It would be very short-sighted as they are not self-sufficient.”