The trouble with trade

Last time it was airplanes and this time it is electric vehicles, with European dairy in the crossfire. Suzanne Christiansen reports.

Sometimes, it has nothing to do with dairy, but cheese gets caught in between disputes between the European Union and other countries. Some may recall the nearly two decades’ long spat with Airbus and Boeing, which in 2019, resulted in a ‘strained’ relationship between the US and EU. This was where billions of dollars of European goods, from tractors to cheese, saw tariffs imposed, due to the complaint that Airbus received subsidies from the EU. Meanwhile, the EU accused Boeing of the same type of US government support. US import tariffs of 25 percent were imposed, for many types of cheeses, including cheddar and roquefort – not to mention Scotch whiskey.

On the UK side, these tariffs were lifted in 2021, after the UK dropped tariffs on some US goods over the issue, post-Brexit. European and US negotiations continued into the end of that year, and the tariffs were ultimately lifted after a summit with the US under President Biden, and the European Union.

Step forward China

Now, the latest spat is between the EU and China. In September 2023, the European Commission initiated anti-subsidy investigations into the EU imports of battery electric vehicles from China. Ursula von der Leyden, EC president, said, “The global market is flooded with cheaper electric vehicles, the price of which is kept artificially low owing to huge state subsidies.” These vehicles appear to be landing mainly in the European Union, partly due to the US still having 25 percent tariffs on a range of imports from China. China’s Ministry of Commerce criticised the EU probe as a “blatantly protectionist act.”

The draft decision to finalise the tariffs on electrical vehicles made in China came into play in August, following on from the provisional tariffs of 5 July 2024. These amount to 17 percent for BYD automobiles, the largest maker in China, while SAIC Motor would see a rate of 36.3 percent. Tesla will see tariffs of nine percent. These are subject to EU member state approval, and the final decision is set to be made by early November.

Why dairy cares

The stage is set. China has now retaliated with an investigation of its own, which will cover a range of products including fresh and processed cheese, blue cheese, milk and cream with a fat content over 10 per cent, according to China’s Ministry of Commerce and the Associated Press.

The formal application was opened on 29 July, when the Dairy Association of China and the China Dairy Industry Association, on behalf of the domestic dairy industry, launched the countervailing probe, the Global Times reports.

In it, the groups claimed the EU and its member states have provided 20 subsidy programmes to the EU related dairy industry. The Ministry has decided to investigate seven subsidy programmes under the EU Common Agricultural Policy, as well as 20 subsidy programmes in member states, including Austria, Italy and Finland. The investigation period for certain dairy products was from 1 April 2023 to 31 March 2024, and the industrial damage investigation period was from 1 January 2020 to 31 March 2024, according to the Global Times.

Further, the Asian giant has also filed a complaint with the World Trade Organization after the provisional tariffs on the electric vehicles were announced. China’s battery electric vehicle exports to the EU amounted to an estimated €12.2 billion in 2023, Reuters reports.

Eucolait, the European assembly of national dairy associations and companies and co-operatives, has been scathing about the retaliation from China, noting in a press release, “Eucolait condemns the decision of China to launch anti-subsidy investigations into EU dairy exports. The EU has proven itself over the years as a reliable supplier of high-quality dairy products and ingredients to the Chinese market. Moreover, in an era where food security is an ever-pressing priority, it is manifestly unfair that food be sacrificed in an industrial dispute concerning electric vehicles.

“China is a major importer of dairy products and ingredients, despite a growing domestic industry and a seven percent decline in milk equivalent in dairy imports in 2023 versus 2022. We call on the European Commission to work at the highest level to urgently resolve this dispute and to ensure that any investigation is conducted in compliance with WTO rules.”

The new measures target about 16 percent of the EU’s dairy sales to China, and amount to four percent of total imports, Bloomberg News points out. Government data shows that dairy imports into China were already falling this year, down by 14 percent versus the same period in 2023, and exports have increased by 27 percent. New Zealand is the top dairy exporter to China, and France is the second largest exporter of cream to the country. Ireland sold €417 million worth of dairy products to China in 2023, while the EU overall amounted to 36 percent of the total value of imports in 2023. This was €1.7 billion, down from €2 billion in 2022, Eurostat says.

Panel: Speaking of trade…

The commitment to grow British dairy exports has been underlined with two industry appointments.

Rachael Speed has joined the Agriculture and Horticulture Development Board (AHDB) as senior international market development manager (dairy). The former NFU trade adviser will work closely with exporters to increase the profile and grow British dairy products globally. Adil Khan has been appointed as vice president of international trade (dairy) in the Middle East and will be AHDB’s new dairy products representative in the Middle East. His role is jointly funded by the Department for Business and Trade (DBT), and he will work with dairy exporters to help grow further opportunities for the sector in the region.

Having spent 23 years working for the UK Government, latterly with the DBT, Khan worked closely with AHDB for the last six years to support the growth of cheese and dairy products in the UAE and the wider region through bespoke events, including Gulfood in Dubai.

Speed says, “I am delighted to join the AHDB. With a strong background in international trade policy and agriculture from time at the NFU I bring with me relationships across the dairy supply chain. I look forward to working with the team and navigating complex overseas markets to unlock new opportunities for dairy products worldwide.”

Khan adds, “I’m extremely pleased to be appointed as AHDB’s representative for the Middle East and look forward to helping grow exports of British cheese and dairy products to the region. My extensive network in the local food and drink sector, deep-seated understanding of the regional business landscape, comprehensive grasp of the commercial requirements of the local business community and trust I have fostered with local stakeholders will play a key role in this.”

Lucy Randolph, AHDB head of international trade development (dairy), notes, “Rachael and Adil’s vast experience and passion for growing British dairy exports will make them valuable additions to our team. Their insight and knowledge will enable us to provide additional support for our levy payers to help them thrive on the global stage.”