Disaster for EU farmers as China threatens £4bn pork and dairy industry

China is threatening severe retaliatory measures against European agriculture, potentially jeopardising a £4bn pork and dairy industry, as the European Commission nears the end of its investigation into Chinese state subsidies for electric vehicles.

Beijing has warned that any EU-imposed tariffs will provoke strong counteractions, extending beyond proposed levies on French brandy to significantly impact European farmers.

The state-owned Global Times reported that China is considering anti-dumping investigations into European pork and dairy imports, which in 2023 amounted to nearly €5 billion (£4 billion circa).

This represents a significant share of EU agri-food exports to China and two percent of the EU’s total exports.

Outgoing Agriculture Commissioner Janusz Wojciechowski has repeatedly stated his desire to keep the agricultural sector out of trade conflicts, even leading a trade mission to Beijing in April. However, it now seems increasingly likely that China will target EU agri-food products.

Pork exporters, in particular, view the potential tariffs as catastrophic. With 1.4 billion consumers, China's demand for pork, including byproducts less popular in Europe, is immense.

Nevertheless, it’s worth noting that only a tenth of Europe’s pork is exported outside the EU, with less than half of that going to China. Despite this, the potential tariffs remain a significant concern.

Jacob Gunter, lead analyst on economy for the Mercator Institute for China Studies (MERICS), suggested that China’s threat of higher pork duties might also serve to stabilise domestic prices amid an oversupply. “This may be a good way for them to stabilise pork prices at home,” he told Politico.

The outlook for dairy exports is somewhat better, although still worrisome. EU dairy exports to China have slowed, and while China remains an important market for certain products, its overall demand has decreased. Laurens van Delft, director of trade and economics at the European Dairy Association, noted that “China’s importance in terms of volumes has decreased over the past years,” particularly for milk, butter, and cheese.

Beyond pork and dairy, processed cereals are the largest category of EU agri-food exports to China, followed by unprocessed cereals. Together, these accounted for over €4 billion last year. However, China’s new “food security law,” aimed at achieving self-sufficiency in grains, could reduce its reliance on these imports.

Alcohol exports, particularly wine and spirits, are also at risk. China’s anti-dumping investigation into French cognac and armagnac, in response to the EU’s probe into Chinese electric vehicles, underscores the broader trade tensions.