French brandy from the town of Cognac, in southwestern France, has become the center of a trade war between China and the EU over electric vehicles. Beijing has imposed temporary anti-dumping measures on European brandy imports in response to the EU Commission’s plans to impose heavy tariffs on Chinese EVs. This has caused anxiety and frustration among cognac makers, who feel like they are being sacrificed in a dispute that has nothing to do with their industry. The National Interprofessional Cognac Association (BNIC) is calling on the French government to find solutions and engage in discussions with China to salvage the situation.
The French cognac industry is heavily reliant on the Chinese market, with China being the biggest market in terms of value and the second biggest in terms of volume for cognac. France’s decision to vote in favor of imposing taxes on Chinese EVs, leading to a 35% increase in customs duties for cognac exports to China, has caused outrage among industry players. China imported about €1 billion worth of cognac from France last year, making France the most affected country by the decision. The sector represents 70,000 jobs and faces additional challenges from bad weather, harvest issues, the economic impact of the COVID-19 pandemic, and Russia’s war in Ukraine.
Cognac makers fear that the Chinese tax hike could have catastrophic consequences for the industry, threatening the livelihoods of operators, winegrowers, merchants, and other professionals in the sector. The tax increase could lead to a nearly 50% price hike in the second-largest market for cognac, making it unaffordable for cost-conscious consumers in China. This could potentially lead to the disappearance of cognac from the Chinese market and the industry as a whole. European brandies such as armagnac and Italian grappa are also expected to be taxed by China, further complicating the situation for grape-based spirits from the EU.
The implications of the trade dispute go beyond economic concerns, as many fear the impact on the cultural heritage and tradition of cognac production in France. The town of Cognac has a rich history of brandy-making, with centuries of expertise and craftsmanship passed down through generations. The country’s reputation as a producer of high-quality spirits could be tarnished if the Chinese market is lost due to the trade war. The French government is under pressure to find a resolution to the dispute and protect the interests of the cognac industry, which plays a significant role in the country’s economy and cultural identity.
Efforts are being made to engage in diplomatic discussions with China to address the issue and potentially find a solution that benefits both parties. The cognac industry is hopeful that a compromise can be reached to avoid the catastrophic consequences of losing the Chinese market. The importance of international trade and cooperation in resolving disputes and protecting industries from collateral damage is being highlighted by this conflict. The future of French brandy and the livelihoods of thousands of workers depend on finding a resolution to the trade war and ensuring the continued success of the cognac industry in the global market.
