John Whelan: Ireland has much to lose from China trade spats
Minister Micheál November Meets Yi Martin Wang Foreign Beijing In Chinese Last
China's announcement last week of an anti-dumping investigation into liquor imports, such as brandy from the EU, was a relatively modest step after Brussels had opened a probe last year into its electric car subsidies.
However, the threat looms, should China follow what it did after its probe into Australian wine imports, when it eventually imposed tariffs of up to 218%, decimating what had been one of Australia's largest overseas wine markets.
There was a development in the Australian wine spat in recent weeks: Beijing proposed lifting the tariffs, just as long as Australia lifted its tariffs on a range of Chinese products.
The spat kicked off when the former Australian government sought a full investigation into the source of the covid virus, which displeased the Chinese authorities. Beijing had sent a clear message: Don’t expect us to drink your wine if you throw mud at us.
In a similar fashion, the new Chinese investigation targeted French cognac, a niche but lucrative product in China for producers such as Pernod Ricard. The action was aimed at the French products in retaliation for France taking a lead role in the EU’s probe into Chinese electric cars, with the interests of French carmakers such as Renault to the forefront.
Beijing has a history of using trade to help it achieve its policy goals. China having flexed its muscles in Australia is reminding Europe about potential retaliation should the EU slap duties on Chinese electric cars.
The EU’s recent trade actions toward China have extended beyond electric vehicles. Last month, the EU also opened anti-dumping probes into Chinese biodiesel and melamine exports.
In November, the EU imposed provisional anti-dumping duties on imports of some plastic products from China, marking a policy that lined up with the anti-China stance taken by president Joe Biden’s administration.
Citing national security concerns, the White House expanded export restrictions aimed at impeding China’s capacity to produce advanced electronic chips, and reached out to some chip makers to ask them to immediately halt scheduled shipments to China of some advanced chip-manufacturing tools.
What does all this mean for Ireland? Economic relationships with Ireland have been on an upward curve since the Chinese premier Xi Jinping’s visit here a decade ago.
Exports in particular have gained, with Ireland emerging as the only EU member state to maintain a trade surplus with China: It was the fifth-largest exporter from the EU in 2022.
The consistent trade surplus, normally a blessing, may now be a cause for concern as the EU, in conjunction with the US, ramps up its rhetoric on potential security threats from over-reliance on China trade.
The composition of our exports indicates where such risks may exist. Based on customs data, the dominant export is Intel’s electronic chip sales, most of which involves an internal transaction between the company’s Ireland-based facilities.
The Institute of China, in a recent study, attributes Ireland’s share of China exports to its replacement of the US as the largest supplier of electronic chips to China since 2018. The microchips are increasingly essential for a wide variety of modern technologies, from smartphones and electric cars to fighter jets and guided missiles.
There are clearly risks to Ireland's continued trade with China. Any US government restriction on US-owned factories based in Ireland that could prevent exports of certain goods to China would have a significant impact on Irish jobs and corporation tax. Equally, aligning too closely with Brussels' policy statements could lose Ireland its China trade.
Government actions towards China show quite a bit of confusion on how to approach China in the years ahead. Tánaiste and Foreign Affairs Minister Micheál Martin, echoing the EU Commission president, has recently called for Irish companies to be aware of their level of exposure to China. But the IDA continues to encourage trade and investment with Chinese companies.
It would be delusional to think that economic and trade cooperation between Ireland and China would not suffer if public political statements are critical of Chinese policy. The convergence of global economic and security issues with competing US, EU, and Chinese interests will require Irish businesses, politicians, and the IDA to shape a coherent policy to manage the risks and avail of opportunities and maintain good relationships.
- John Whelan is an expert on international trade