China's Trade Muscle-Flexing Threatens Further Woes for EU's Local Agri-Food Producers

While China's 29 August announcement that it would refrain from imposing new tariffs on EU brandy will come as welcome news, the bloc's agri-food sector is in no way out of the woods. Just one week earlier, the Chinese Ministry of Commerce unveiled an anti-subsidy investigation into EU dairy imports, including cheeses and milk, following a request received from the country's dairy industry in late July.

Mirroring Brussels's probe into and subsequent tariff hike proposals on China's heavily subsidised electric vehicle (EV) imports, Beijing's latest challenge to the EU's agri-food producers comes at a pivotal moment as trade tensions continue rising and the European Commission prepares to reset its troubled relationship with the bloc's farmers.

As the EU launches its reformed agri-food policy approach over the coming months, policymakers will need to avoid unforced errors that risk making matters worse for European producers that have found themselves in China's crosshairs.

EU farmers caught in the crossfire

Set to run for one year, China's freshly announced dairy probe rests on suspicions that the EU's Common Agricultural Policy (CAP) subsidies have enabled European exporters to charge "artificially low prices," placing Chinese producers at an unfair competitive disadvantage.

Last year, EU dairy exports to China exceeded €1.75 billion, accounting for over 12% of the bloc's total agri-food exports in the country, making China "a crucial market for us, as our export is growing by double digits," according to industry association Assolatte's president, Paolo Zanetti. Analysts have warned that bolstered tariffs from Beijing could "significantly impact the sector," with Zanetti lamenting how "every time there is a trade dispute," EU agri-food products are targets, even when "it has nothing to do with them."

EU farmers association COPA-COGECA expressed the same sentiment in June following China's new investigation into EU pork exports—announced just days after Brussels unveiled its proposed tariffs on Chinese EVs—with policy adviser Ksenija Simovic declaring that "we are being retaliated against due to disputes that concern other sectors." As Bruegel think tank researcher Niclas Poitiers has rightly noted, Beijing is equally targeting Europe's pork sector due to "the importance of agriculture in European politics"—a reality dramatically demonstrated by the past year's farmers' protests and pre-EU election political pandering.

In 2023, the EU pork sector represented 17% of the bloc's total agri-food exports to China, underscoring the significance of Beijing's unfolding powerplays. Simovic has notably warned that China's probe would generate major administrative costs for the sector's producers, while COPA-COGECA recently decried that despite its farmers' maintaining production and export practices "in full respect of EU and WTO rules," they once again face threats from politically motivated anti-subsidy investigations.

Nutrition label adding insult to injury

With both dairy and pork producers' trade volumes and the broader CAP system concerningly challenged by Beijing, the EU sector cannot afford internal policy misfires. European Commission President Ursula von der Leyen's recently-promised "Vision for Agriculture and Food" for her new term provides a key opportunity to definitively axe a legacy 'Farm to Fork' policy threatening the very products targeted by China.

Unveiled in 2020, the Commission's harmonised nutrition label proposal has been in limbo since late 2022, with broad opposition to French candidate Nutri-Score largely responsible for the stalemate. Indeed, Nutri-Score's algorithm has been a lightning rod of criticism, with producers of EU heritage foods such as France's Bleu d'Auvergne cheese and Spain's jamón ibérico condemning its reductionist focus on fat and sodium content without factoring in the wider dietary benefits of these micronutrient-rich products.

As a result, these products have long received unjustifiably negative 'D' and 'E' Nutri-Scores, while the likes of Coca-Cola and Chocapic cereal have received dubious 'As' and 'Bs.' Despite Nutri-Score's latest algorithm update—itself an admission of the system's inherent flaws—this supposedly "corrected" version has downgraded whole milk to 'C,' placing it on par with Diet Coke, while Europe's protected designation of origin (PDO) hams and cheeses continue to face punitive grades. 

Beyond the expanding anti-Nutri-Score alliance among the EU's food producers and governments, with Portugal, Romania, Spain, and Czechia among the member-states either banning or refusing to adopt the label, Nutri-Score has increasingly come under fire from the scientific community. World-renowned French oncologist David Khayat has recently asserted that Nutri-Score's simplistic manner of evaluating nutritional quality often leads consumers to misguided dietary choices, while eminent pediatric endocrinologist Robert Lustig has claimed that the label "leaves much to be desired."

Decisive period in months ahead

Given the emerging geopolitical climate compromising the EU's key agri-food exports, the Commission must avoid its own goal of selecting Nutri-Score for bloc-wide implementation. Looking ahead, the EU must tread carefully as it faces a genuine threat to its vulnerable agri-food sector—despite certain optimistic views that China's anti-subsidy probe is merely a symbolic, face-saving response to Brussels's tariffs on its prised EV exports "unlikely" to lead to a significant trade conflict.

EU policymakers could help protect the pillars of the bloc's culinary excellence and agri-food export economy by advancing a comprehensive agenda to promote fair trading practices and higher incomes for its farmers. Crucially, the Commission's forthcoming Vision for Agriculture must deliver on its promises for a fresh start, focusing on farmers' challenges, adapting to their rapidly evolving needs, and abandoning the disconnected policies that have endangered the very farmers now facing the brunt of Beijing's trade retaliation.

Beyond improved financial support through an enhanced CAP subsidy system better tailored to the needs of smaller producers, Brussels must equally ensure greater regulatory flexibility to give agri-food producers the headroom needed to drive export-driven growth and navigate emerging market threats completely out of their control.

Finally, the EU executive must strongly back its key industry associations, such as the European Dairy Association (EDA), in their efforts to resolve the emerging EU-China trade disputes "with a constructive spirit," in the words of EDA Secretary General Alexander Anton. While a Commission spokesperson's recent commitment to "firmly defend the interests of the EU dairy industry and the Common Agricultural Policy" has provided some reassurance, these words will need to be followed with bold action and diplomacy to save the bloc's agri-food producers from unnecessary and avoidable hardship.