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Anti-dumping investigation in China: French cognac suspended from Macron-Xi discussions

The French cognac industry, which says it is “hostage” to tensions between the EU and Beijing, is banking on the meeting between Emmanuel Macron and Xi Jinping, Monday and Tuesday, to obtain the suspension of an anti-dumping investigation targeting it in China, its second market.

Since January, the French spirit has been targeted, like all wine spirits imported from the European Union, by an investigation by Chinese authorities into an alleged competition infringement.

Launched after a complaint from Chinese alcohol professionals, this procedure is also considered by observers as a measure of retaliation to a European investigation, largely supported by France, into subsidies for electric cars produced in China.

For Jean-Marc Figuet, professor at the School of Economics in Bordeaux (south-west) and specialist in the wine market, Beijing acted “as a fine strategist” by “targeting” cognac, “a largely surplus sector in French agriculture in crisis, which affects a very specific region”.

With a quarter of its bottles shipped to China, its main market after the United States, this sector that is ultra-dependent on exports (98% of sales) now fears an increase in customs duties, like the one suffered by Australian wines in recent years, indicates its inter-professional association.

“Thermometer” of diplomacy

“We are a bit like the thermometer of bilateral relations with China and we have the feeling of being totally taken hostage” by current trade tensions, believes Raphaël Delpech, director general of the National Interprofessional Cognac Bureau (BNIC).

According to him, the producers of the spirit participate “rigorously” in the “extremely detailed” questionnaires demanded by Beijing but “the fear is to be right on a legal level, without being listened to on a political level”.

Chinese President Xi Jinping is expected in France on May 6 and 7 to celebrate 60 years of diplomatic relations during a state visit.

The cognac industry, which says it represents 72,500 jobs in France and 3.35 billion euros in exports, is banking on this meeting with French President Emmanuel Macron to “achieve the suspension” of the anti-dumping investigation.

For Anthony Brun, president of the cognac winegrowers’ union, “we will absolutely have to find solutions during these discussions” because “we know that we have nothing to reproach ourselves for”.

“The question of cognac is (…) the subject of the greatest attention on the part of the French authorities and first and foremost the President of the Republic, declared the French presidency to journalists. This question will be addressed during exchanges in order to ensure that French interests are preserved during and at the end of the procedure launched by the Chinese authorities.

Decline in exports

Although it is still “too early” to measure the impact of the procedure since January, the industry fears seeing its commercial positions “crumbling” in China, after a year 2023 in decline worldwide.

Last year, exports fell to 165.3 million bottles compared to 212.5 million in 2022, a performance which was already down 4.8% compared to 2021.

According to professionals, this decline is explained by a “difficult context” with inflation, consumers turning away from a luxury product when purchasing power falls, and by the reduction in imports from the United States (- 45%), still in the process of selling off stocks accumulated during the years of the pandemic.

For economist Jean-Marc Figuet, after flourishing years, cognac, “very dependent on global growth”, has above all experienced “a combination of unfavorable events”, without suffering a “structural crisis”.

But “without a diplomatic solution between France and China”, and with the possible return to power in the United States of Donald Trump, who had already threatened to target French wines in the past, “the context could become more complicated” the future, he warns.

This article is originally published on lorientlejour.com

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