The investigation, targeting various dairy products, is viewed as a clear retaliatory move by China after the European Commission put Chinese automakers on notice it planned to impose new tariffs on cars imported into Europe.
The US and Europe have long had concerns about the recent and rapid rise in low-priced exports of electric vehicles coming from China to the EU. In response, China said it had a range of concerns about various farm subsidy schemes operated by the EU to assist farmers.
It seems once again, Irish agriculture has found itself at the forefront of an international trade dispute. Given the central role it plays in our society and our wider economy, our agriculture sector has often found itself in such a position.
In decades past, this has meant conflict with our closest neighbour the UK, when agriculture was often central to conflicts related to border disputes, the export of food during the famine, the Economic War in the 1930s and most recently in Brexit negotiations.
The impact of tariffs or trade disputes can be long-lasting and far-reaching.
In the 1930s, Éamon de Valera and the fledgling Irish Free State engaged in an ‘Economic War’ with Great Britain. Disagreements over land annuities and pension payments for former RIC officers saw the British government impose import duties on all goods from the Free State along with restrictions on livestock imports from Ireland. Retaliatory duties were placed on coal imports into Ireland.
Despite strong support for de Valera’s actions from the Irish public, the trade war had a severe impact, with many farmers facing bankruptcy without a market for their beef and dairy. Lasting until 1938, the impact of the conflict was long-lasting and highlighted the fragility of Irish agriculture’s dependence on the UK for exports.
In recent decades, the Irish economy has diversified into pharmaceutical, technology and financial services. As we work to maintain an open economy which encourages foreign direct investment, the country’s food, drink and agriculture industry remains significant, but one that is heavily reliant on a buoyant export market.
Dairy remains a dominant element of this export market. Most recent export figures from the Central Statistics Office (CSO) for June show Irish farmers and food producers exported just under €400m of dairy products. Just under a quarter of this went to The Netherlands, with about €85m going to Northern Ireland and Great Britain.
Exports to China, at €12.3m, places it eighth on the list and the largest importer of Irish dairy outside Europe and the US. Ireland’s food promotion body Bord Bia said dairy exports to China last year were valued at €420m.
Naturally, farm organisations here have voiced alarm at the move. President of the ICMSA Denis Drennan said “yet again” Irish dairy producers might end up as “collateral damage” in a trade war that was not of their making.
“I think if you suggested to an Irish dairy farmer that he was in receipt of State funding towards the retail price of his product, he or she would laugh in your face,” he said.
“We have to be blunt here: We need this like the proverbial ‘hole-in-the-head’ and if the EU is going to embark on a trade dispute that wipes out our powder and butter trade with China, then ICMSA will be demanding that the EU compensate the farmers who you can be absolutely sure will be the ones who end up paying the cost of a trade dispute that we had nothing to do with and resolution of which is completely outside our control,” Mr Drennan said.
Irish food producers were in a similar situation five years ago when the EU was in a trade dispute with another global superpower. To cement his America First policy, then US president Donald Trump engaged in a tariff war with the EU.
This mainly focused on aluminium and steel but high-profile Irish brands such as Kerrygold, hugely popular in the US, cheese products, and some Irish whiskeys were added to the US sanctions list of EU goods that faced prohibitive hikes in tariffs of 25%.
The move came after the US won a ruling by the World Trade Organization that EU member states had for years illegally funded Airbus, the continent’s hugely successful rival to US plane maker Boeing.
In its own retaliation, the EU placed tariffs on a range of US products including Harley Davidson motorcycles and bourbon whiskey. The election of current president Joe Biden eventually led to a thaw in the transatlantic trade conflict.
How costly this current dispute with China could end up for Irish farmers remains to be seen. Exports to China have fallen in recent years as the nation expands its domestic dairy market.
The nature of the Chinese investigation is also somewhat telling, hinting they are engaging more in a game of brinkmanship rather than any direct punitive action. The probe, which began following a complaint by the Dairy Association of China and the China Dairy Industry Association, will focus on various types of cheeses, milks and creams intended for human consumption.
While Ireland is named in the investigation, our dairy exports to China largely consist of milk powders for baby formula and nutrition drinks.
Conor Mulvihill of the Ibec association Dairy Industry Ireland acknowledged this fact. “Irish dairy is well diversified in its product mix and destination countries.
It remains to be seen whether the current trade conflict between the EU and China will escalate further but until its resolution, Irish dairy exports to its eight largest recipient remains uncertain.
European Commission spokesperson Olof Gill said the bloc “will firmly defend the interests of the EU dairy industry and the Common Agricultural Policy, and intervene as appropriate to ensure that the investigation fully complies with relevant World Trade Organization rules”.
It now seems the exports to China from our oldest industry are intertwined with electric vehicles.
The arrival of BYD, Geely and the China-State-owned SAIC represents a real threat to the long-dominant US, European and Japanese vehicle markets, which are eager to prevent these companies taking a dominant foothold.
The trade conflict puts a new focus on the scheduled trade mission by Agriculture Minister Charlie McConalogue and Bord Bia to China and the Republic of Korea, which begins in 10 days time.