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Shock To The System (I): Can the EU fend off the threat of Chinese electric cars?

Chinese Whispers

NOTE

Analysis of Chinese Retaliation Against the EU

China has retaliated against the EU by launching an anti-dumping probe into European brandy, particularly French cognac. This move, seen as tit for tat, is reminiscent of past retaliations such as targeting French wine over a decade ago. Recently, China has escalated its retaliation by threatening the pork industry, launching an anti-dumping investigation into EU pork exports to China. This action would primarily impact France and Spain, with Germany, Slovakia, and the Netherlands also being potential targets. The EU is concerned that China could target wine, dairy, and certain automotive exports like wide-body cars. To increase opposition within the EU, China might asymmetrically target agricultural exports from countries less involved in the issue. This retaliation aims to influence EU member states to vote against the EU's actions in November through qualified majority voting, presenting a challenge for the EU to build a coalition against China's measures.

00:00
Speaker 2
And let's talk about the scope there is for Chinese retaliation. We've already seen some movements fimbuking you outline what we've seen so far? And what else did the Chinese have in their armoury?
Speaker 1
So far we've seen in, was it December or January we saw the first real retaliation. And of course, these are never officially linked. But you can read between the lines and sort of guess that they are. So China has launched an anti -dumping probe into European brandy, which means French cognac. Billions of euros worth of French cognac goes to China every year. France was the main instigator of the electric vehicle investigation. As I said earlier, the French, their rationale seems to be let's get the duties on the Chinese imports so the companies have to come and set up factories in France. So it's quite a transparent tactic that they have. And the Chinese, although the investigation was launched unilaterally by the European Commission, everybody in Europe, myself included, was writing and reporting that the French had unofficially requested it. So it was quite obvious to the Chinese. So we knew that they would be in the firing line. So this brandy probe was very much seen as a tit for tat. And it was almost a carbon copy of what happened 10 years ago, whenever the European Union did a similar thing with solar panels. The first product that the Chinese government went after in retaliation was French wine. So this is a, again, this is a strong lobby. It's a sensitive, emotional, symbolic industry. It's not going to break the bank of the French economy, but it will make a lot of people very unhappy. So they went after Cognac initially, and just last week, this week in fact, we started to see threats against the pork industry, and that was formalized on Monday with an anti -dumping investigation being launched into EU pork exports to China. That would target, again, France, but mostly Spain, which is the world's biggest exporter of pork, and another country which has strongly backed the EV probe for the very same reasons that the French have. They want Chinese investment into the car industry in Spain. Other countries rather that will be affected there will be Germany, of so it will only serve to strengthen their resolve against this. And then some other smaller exporters such as the Netherlands who are kind of in the bad books with China also because of the export restrictions they've had to impose on equipment for making semiconductors through ASML. So there's layers here, you know. So by going after pork, China is very easily able to get a few big hitters in the European Union who they possibly hope will work against the probe in the coming four months. What else is in the armory? The EU is very worried that wine could be a target again. another sensitive symbolic industry in France, Italy, other countries. Dairy has been flagged in the state media as a potential target as well as certain automotive exports, wide big engine wide body cars which I think as somebody who's not much of a petrolhead I think that translates to SUVs which are made in Germany and Slovakia. So there's lots of levers they can pull. And they could also go asymmetrically. They could start targeting agricultural exports from countries who have not really taken too much of an interest in this. But if the Chinese want to gin up a lot of opposition, they could go after other countries in order to help the Germans build a coalition against this. Because the only way they can stop this, unless they negotiate a deal with the Commission, the only way they can stop this is by getting a majority of EU member states by population, it's called qualified majority voting, to vote against this come November. So it'll be interesting to see how they sort of try and go about building a coalition and whether that's possible. I think it would require 15 member states. I find it very unlikely, but you never know.
Speaker 2
Yeah.

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