Berliner Boersenzeitung - Angry French cognac makers see red over Chinese tariffs threat

Some 800 protestors riding on tractors and carrying signs gathered in France's southwestern town of Cognac this week demanding a delay to an upcoming European Union vote to impose duties on Chinese electric vehicles.

This protest -- the first since 1998 -- comes after Beijing refused to rule out future tariffs following an anti-dumping investigation into brandy imported from the European Union.

The probe was launched months after the EU undertook an investigation into Chinese electric vehicle (EV) subsidies.

And with the EU set to vote next week on introducing tariffs on Chinese EVs, France's brandy makers are worried about the consequences that vote could have on their livelihood.

"The situation is urgent," said Anthony Brun, the union head for Cognac's brandy makers, adding that a decision to levy tariffs on Chinese EVs "will jeopardise the entire industry".

-'Downward spiral'-

Cognac's interprofessional association BNIC said it was recently notified that China intends to impose tariffs of around 35 percent on European brandy, a move seen as targeting France.

This comes despite repeated assurances from Beijing it would not implement provisional tariffs after it found European brandy had been dumped into China, threatening the country's domestic industry with "substantial damage".

"For a year now, we have been warning French and European authorities about this risk and the need to stop this downward spiral," wrote Brun in a letter addressed to new French Prime Minister Michel Barnier about the tariff threat.

"We are the victims without being in any way responsible... We have not been listened to," said Brun, writing on behalf of the cognac union.

In May, French President Emmanuel Macron thanked his Chinese counterpart for not imposing customs duties on French cognac amid the probe, presenting Xi Jinping with bottles of the expensive drink.

But cooperating with Chinese authorities has produced "no results" and incurred millions in costs, said Florent Morillon, head of BNIC.

Tariffs could force French brandy to "disappear from the Chinese market," which accounts for a quarter of exports, added Morillon.

-'No way out'-

The threat of losing the Chinese market could be existential for some brandy makers, who count on overseas consumers for up to 60 percent of their profits.

China imported more brandy than any other spirit in 2022, with most of it coming from France, according to a report by research group Daxue Consulting.

Cognac producers are calling on the EU to postpone its September 25 vote on imposing tariffs on EVs imported from China, fearing China will respond with customs duties on European brandy.

"We have no way out," said Rodolphe Texier, a member of a farmers' union in France's western Charente region.

"If Europe doesn't follow us, we're dead," said Texier, adding he is concerned about widespread repercussions throughout the industry which could impact everyone from distillers to barrel makers to truck drivers.

With more than 4,400 farms and some 85,000 jobs, France's cognac industry is already in trouble after it saw a 22 percent drop in sales in 2023 and dramatically reduced new vine planting zones.

France's brandy makers are not the only ones under pressure, as Beijing launched a probe into EU subsidiaries on some dairy products in August.

Even though a meeting is set "in principle" between BNIC and the prime minister's office, Florent Morillon told AFP there is a feeling of being "taken hostage" by Paris and Brussels.

"The French and European authorities have decided to sacrifice us," wrote union head Anthony Brun.

"Never mind our jobs, our weight in the local economy, our contribution to trade, and to France's image," he added.

(A.Lehmann--BBZ)