Open Editor’s Digest for free

Rula Khalaf, editor of the Financial Times, picks her favorite stories in this weekly newsletter.

China has hit the EU’s weakness in its battle over electric car imports: pork. Poultry and beef could be next – especially chicken feet and other cuts that Europeans tend not to eat, but depend on selling.

It is a clear choice on Beijing’s part. Food and drinks these days are among the few products of which China buys more than it sells to the bloc, and was the first in the firing line when Beijing retaliated against anti-subsidy duties of up to 38 percent on electric cars.

This shift highlights how trade relations between the EU and China have been turned upside down since Beijing joined the World Trade Organization in 2001. China has moved up the value chain rapidly, becoming a research and development powerhouse at the center of global supply chains. Its trade surplus with Europe in advanced equipment such as batteries, solar panels and mobile phones has swelled.

Meanwhile, the European Union still sells a lot of cars and planes. But its powerhouse is increasingly serving China’s 1.4 billion consumers with more traditional consumer goods: cheese, wine and handbags.

China’s fearsome Ministry of Commerce’s trade defense team aren’t just experts at pugnacious rhetoric. They have laser sights trained on vulnerable areas in the EU’s body politic, where a single shot can set off screams heard very quickly in parliaments and, by extension, governments.

The target chosen was an anti-dumping investigation into EU pork imports worth €2.5 billion a year, including pork such as pork that appears in Chinese cuisine. Farmers, a vocal lobby group that is particularly influential in the raucous protests, know they have few other alternative markets.

Some animals are only profitable because the farmer can sell the “fifth quarter” – such as the head, tail and internal organs – to the Chinese. Chicken feet, thrown in the trash by many French people Butcher shopIt is a special sensitivity.

Beijing has already opened an investigation into the alleged dumping of brandy, which will mainly hit France, which has pressured European Commission President Ursula von der Leyen to impose tariffs on vehicles.

The choice of pork, which affects Germany, could be a “personal attack on von der Leyen,” said Hosok Lee Makiyama, director of the European Center for International Political Economy in Brussels.

He also expected “retaliation in dairy products, cheeses and other foodstuffs that are considered among the basic export commodities of France and Italy.”

Trade surplus in Food and drink It reached about 6 billion euros in 2023, a six-fold increase in a decade. At that time, European farmers increased their herds to serve this thriving market while reducing domestic support.

John Clarke, former chief agricultural trade negotiator for the European Commission, said the Chinese were well aware of the sensitivities after more than a year of farm protests over falling incomes. He thinks drinks could come next.

Removing these barriers will also have a cost. “When a European leader goes to Beijing to reopen the market for steak, he should give a gift in return,” Clark said. “We sell them to Piraeus port [in Greece]They buy feta cheese and yogurt.

The problem for Brussels is that there is little the EU can withhold in return. It relies almost entirely on Chinese solar panels and does not want to increase the cost of going green. It also needs Chinese-made batteries for its own electric cars.

Under US pressure, the Netherlands has halted exports of advanced chip manufacturing machines, but cutting off supplies of Hermes scarves is unlikely to bring the Chinese economy to its knees.

Guillaume Derain, economist at BNP Paribas, points out that Europe’s days are merely buying Cheap Chinese games It’s long gone. “They are now importing more phones and cars: these two sectors account for 17 percent of EU imports from China in 2023,” he wrote in a recent note.

China has stuck by the book in its pork investigation, leaving it open to appeal to the World Trade Organization if it decides there are subsidies.

A harsher alternative is to strike European products for allegedly not meeting food safety standards. China banned beef from several European Union countries for more than 20 years after a foot-and-mouth disease outbreak in 2001, for example. Some pork has been banned since 2019 due to African swine fever.

There are limits to the extent to which China can use pork as leverage in trade disputes. “Food is too important to be held hostage,” Clark said. “That would be very short-sighted because they are not self-sufficient.”