Trade Tensions Affect Cognac Industry in France
The picturesque wine-growing town of Cognac, nestled in the heart of southwestern France, has found itself at the center of a brewing trade war between China and the European Union. Since mid-October, Beijing has enacted temporary anti-dumping measures on imports of European brandy, a move that has raised alarms among local producers. This escalation follows the EU Commission’s intent to impose substantial tariffs on electric vehicles coming from China, which has further complicated international trade relations.
Amidst this turmoil, discontent and anxiety are palpable among the makers of the renowned cognac. Florent Morillon, the head of the National Interprofessional Cognac Association (BNIC), expressed the industry’s frustration, stating, ‘We’re being completely sacrificed.’ He elaborated, “We find ourselves held hostage in a dispute between the EU and China over electric vehicles, a situation that has no bearing on the cognac sector.” Morillon urged the French government to actively seek solutions and engage in dialogue with China to mitigate the fallout, highlighting the significance of the Chinese market as their largest in terms of value and the second largest in volume.
Despite some EU member states, such as Germany, opposing the imposition of tariffs on Chinese electric vehicles, France voted in favor of the measure, inciting anger within the cognac industry. As a result, customs duties for cognac exports to China are set to increase by a staggering 35% as a temporary deposit. France stands to be the most affected nation, with China importing nearly 99% of the country’s cognac last year, translating to approximately €1 billion in revenue.
Impact on Employment and Industry
This decision comes at a particularly challenging time for cognac producers, who are already grappling with adverse weather conditions, a less-than-ideal harvest, and the economic repercussions of the COVID-19 pandemic, coupled with the ongoing conflict in Ukraine. The industry, which supports around 70,000 jobs, now faces an uncertain future. Anthony Brun, chairman of the General Union of Cognac Winegrowers (UGVC), warned, “The introduction of these Chinese taxes, which could potentially sever our access to our second-largest market, would have catastrophic consequences for all stakeholders, including winegrowers, merchants, and the entire ecosystem that relies on our industry.”
Brun further elaborated on the potential ramifications, stating, “Our consumers are increasingly cost-conscious. This proposed tax could lead to price increases of nearly 50% in our second-largest market. If we lose our foothold in China, it could spell the end of the cognac industry as we know it.” The looming threat extends beyond cognac itself, as other European brandies, such as armagnac, Italian grappa, and various grape-based spirits, will also face similar taxation from China.
