Corina Pons, Emma Pinedo and Charlie Deveraux
MADRID (Reuters) – China’s investigation into dumping EU pork imports following tariffs on Chinese electric cars caught Spanish pig farmers by surprise this week, but the sector has proven itself resilient and far less vulnerable than the bloc’s auto industry.
Spain supplied 22% of China’s pork imports in 2023, worth 1.2 billion euros ($1.29 billion), and could lose more than any member of the bloc due to an investigation into underpricing pork after last year’s week, the EU took aim at subsidized imports of electric vehicles into China. .
“It was like a shock from cold water, we did not expect it,” Giuseppe Aloisio, director general of the National Association of the Spanish Meat Industry (ANICE), said of the announcement.
“This is concerning because the volume is significant, but it will not bankrupt the pork sector if the Chinese ultimately decide to impose tariffs,” he added.
The investigation was prompted by a complaint filed by the China Livestock Association on behalf of the domestic pig industry, China said, without elaborating.
Subsidies received by the pork industry are in line with World Trade Organization rules, Spanish Agriculture Minister Luis Planas said at a news conference on Tuesday, adding that Spain is in talks with the EU on possible solutions.
Since the investigation is likely to take at least a year, there is still plenty of time for negotiations.
However, Spain’s pork sector has proven resilient, and the great strategic importance of its auto industry – Europe’s second largest after Germany – means Spain is unlikely to try to push the EU to reverse its measures against Chinese electric vehicles, despite the threat of tariffs on pork, said Miguel Otero, a senior analyst at the Royal Elcano Institute in Madrid.
European automakers are facing an influx of cheaper electric vehicles from Chinese competitors. The European Commission estimates their EU market share has risen to 8% from less than 1% in 2019, and prices are typically 20% lower than EU-made models.
SACRIFICE PORK
“If the trade-off is that you’re not going to export pork to China, but you leave the auto industry as is or expand it, you’re sacrificing pork,” Otero said.
Spain has not expressed its position on tariffs for electric vehicles. The Ministry of Economy declined to comment.
Cars and auto parts accounted for 18% of Spain’s total exports and 10% of its gross domestic product in 2023, according to the Spanish Institute of Foreign Trade (ICEX). According to the Spanish Automobile Manufacturers Association, the industry is worth around 40 billion euros.
On June 12, the EU imposed additional tariffs on Chinese electric vehicles to combat excessive subsidies and protect the more than €1 trillion industry, according to McKinsey & Company.
Meanwhile, Spain’s pork industry has weathered import bans imposed by Russia over swine flu fears in 2009 and 2013, and after the EU imposed sanctions on Russia in 2014 over its annexation of Crimea.
Russia was Spain’s largest buyer outside the EU in 2012, importing €153 million worth of frozen pork, a figure that fell to €180,000 in 2014.
The sector is ready to move again to other markets, as happened with Russia, said Alberto Herranz, director of the Spanish pork producers’ association Interporc.
“When the Russian market was closed, we did not cry either in the European Union or in the Ministry of Agriculture, but took a step forward and began to look for diversification,” Herranz said.
Trade with China picked up, but exports to Russia stopped. Frozen pork exports from Spain to China peaked at €2.5 billion in 2020 as the swine flu outbreak crippled China’s domestic production.
Although China remains its largest market, exports have since fallen and are expected to continue to fall as production in China returns to normal. Meanwhile, exporters are already making contingency plans to expand into other Asian markets such as Japan, South Korea and the Philippines, according to ICEX data.
However, the bloc’s biggest pork producer, which has benefited from swine fever hitting production in Germany, feels aggrieved that it has become collateral damage in the fight between the world’s two biggest trading powers, ANICE’s Aloisio said.
“We see ourselves as spectators and victims of a train wreck between great economic powers, and we are beginning to pay the price,” he said.
But China’s response could have been much worse, given that pig production makes up a small percentage of EU exports to China and that producers have time to adapt, suggesting a reluctance to engage, Eurointelligence analysts wrote in a note.
“This could show that China is willing to reach an agreement with the EU on tariffs, rather than seeing them as the opening salvo in a trade war,” Eurointelligence said.
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