John Whelan: Trade tensions threaten Ireland's booming exports
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Chinese electric vehicles are winning a bigger share of the market in Europe. Customers around Europe, including Ireland, attracted by the competitive prices and design, pushed the demand up. Most do not care or know about the Chinese government subsidies that keep the prices down and pump-up exports into the EU.
However, increasingly the rapid rise in Chinese car imports, now threatens the viability of the vast EU motor car manufacturing industry, creating a major political storm in Brussels.
The trading picture looks quite different across EU member states, those with large motor industry manufacturing plants, such as Germany, France, Italy and Spain have the biggest concerns. Ireland the least.
Irish exporters, who over the past decade have been ramping up sales of a wide range of goods to China, soaring by a further 9% in the first six months of the year, could find themselves caught in a very damaging cross fire, as the promised increases in EU tariffs on EV’s kicks-in, and the threatened China retaliation inflicts high tariffs on a wide range of EU exports. Some of which could be devastating for Irish traders.
Recently, China's Ministry of Commerce announced the opening of an anti-dumping investigation into certain dairy products imported from the EU. The Ministry issued a statement that they will examine possible European anti-competitive practices concerning dairy products, including fresh cheese, blue cheese and other dairy specialities.
Among the countries cited by the Ministry, Ireland — the biggest exporter of dairy products to China — seems to be the most vulnerable.
Beijing has already targeted pork and spirits. Just three months ago, China launched an anti-dumping investigation into European pork shipments. In the firing line were fresh or frozen pork cuts and certain salted or smoked products, as well as offal — parts of the pig that are rarely consumed in Europe but find a very valuable outlet in China.
Irish whiskey producers will be hoping to avoid the Chinese anti subsidy investigation into spirits, which seems to be mainly focused, for now, on brandy, produced mainly in France and creating around €1.6bn in sales to the Chinese market in 2023.
However, the escalating trade rhetoric can easily degenerate into a full-blown trade war, ranging across many industries and creating chaos along the supply chain form Ireland to China.
For Ireland, the Chinese market is an enormously important one, ranking as the sixth largest market for our exporters, but also the fourth largest source of supplies into Ireland, next after the US, UK, and France.
The Chinese government’s policy to heavily subsidise various manufacturing facilities, has been the issue of contention in multiple disputes with the EU, not only with export subsidies on cars, but also on solar panels, steel, chemicals, and computer chips.
It is not surprising that the Chinese officials have identified the agricultural industry in the EU, as a target for its probe into heavily subsidised sectors in Europe. Targeting that sector where the EU is weakest, with increased import tariffs, is to be expected.
Both sides are anxious to protect employment and the ability to lucratively export to other parts of the world.
Regrettably, there is unlikely to be any win-win outcome to the EU/China conflict.
Trade tensions are set to continue without a wider acceptance on both sides for the need to look at longer term, mutually beneficial solutions, inclusive of accepting that China is an important trading partner, not an ogre gobbling up European jobs and flooding western markets with cheap imports.
- John Whelan is an expert in international trade.