Corina Pons, Emma Pinedo, Charlie Devereux
MADRID (Reuters) – A Chinese dumping investigation into EU pork imports, following tariffs on Chinese-made electric vehicles (EVs), spooked Spanish pig farmers this week but the industry proved resilient and far less vulnerable than the EU’s car sector.
Spain supplies 22 percent of China’s pork imports in 2023, worth 1.2 billion euros ($1.29 billion), and stands to lose more than any other EU country in an investigation into low pork prices after the EU last week targeted Chinese imports of subsidized electric cars.
“It’s like a drop of cold water and we never expected it,” Giuseppe Aloisio, secretary general of the Spanish Meat Industry Association (ANICE), said of the announcement.
“It’s a concern because the volumes are large, but it’s not going to bankrupt the pork industry if China decides to impose tariffs,” he added.
The Chinese government said the investigation followed a complaint filed by the China Animal Husbandry Association on behalf of the country’s pork industry, but did not provide further details.
Spanish Agriculture Minister Luis Planas said at a press conference on Tuesday that subsidies received by the pork industry comply with World Trade Organization rules, adding that Spain was discussing a solution with the EU.
The investigation is expected to take at least a year to complete, giving plenty of time for negotiations.
But Spain’s pork industry has proven resilient and given the strategic importance of its auto industry, Europe’s second-largest after Germany, Spain is unlikely to pressure the EU to roll back its measures against Chinese-made EVs, despite the threat of pork tariffs, said Miguel Otero, a senior analyst at the Elcano Royal Institute in Madrid.
European automakers are struggling with an influx of low-cost electric vehicles from Chinese rivals: The European Commission estimates that China’s share of the EU market has risen to 8% from less than 1% in 2019, and that their vehicles are 20% cheaper than EU-made models.
Sacrificing pork
“If the trade-off is not exporting pork to China but maintaining or expanding the auto industry, then you’re sacrificing pork,” Otero said.
Spain has not made clear its position on EV tariffs, and the Economy Ministry declined to comment.
According to the Spanish Foreign Trade Association (ICEX), cars and auto parts were set to account for 18% of Spain’s total exports and 10% of its gross domestic product in 2023. The Spanish Association of Automobile Manufacturers says the industry is worth around 40 billion euros.
On June 12, the EU imposed additional tariffs on Chinese-made EVs in an effort to combat excessive subsidies and protect an industry worth more than 1 trillion euros, according to McKinsey & Company.
Meanwhile, Spain’s pork industry has endured import bans after Russia imposed them in 2009 and 2013 over swine flu fears, and again in 2014 after EU sanctions were imposed on Russia for its annexation of Crimea.
Russia was Spain’s largest customer outside the EU in 2012, importing 153 million euros of frozen pork, but this fell to just 180,000 euros in 2014.
Alberto Herranz, head of Spain’s pork producers association Interpolc, said the industry was ready to pivot again to other markets, just as it did when it withdrew from Russia.
“When the Russian market closed, we didn’t go crying to the European Union, we didn’t go crying to the Ministry of Agriculture. What we did was take a step forward and look to diversify,” Herranz said.
While exports to Russia came to a screeching halt, trade with China has recovered: Spanish frozen pork exports to China peaked at 2.5 billion euros in 2020, as the swine flu epidemic devastated China’s domestic production.
China remains the largest market, but exports have since declined and are expected to fall further as Chinese production returns to normal. Meanwhile, exporters have already put contingency plans in place, nudging other Asian markets such as Japan, South Korea and the Philippines to grow, according to ICEX data.
Still, the EU’s largest pork producers, who have benefited from swine flu’s hit to German pork production, are angry at being caught in the crossfire between the world’s two biggest trading nations, ANICE’s Aloisio said.
“We find ourselves bystanders and victims of a train collision between economic powers, and we are beginning to pay the price,” he said.
But China’s reaction could have been much worse given that the pork industry accounts for a small proportion of EU exports to China, suggesting producers have time to adapt and no desire for confrontation, Eurointelligence analysts wrote in a note.
“This may signal that China is willing to reach a deal with the EU rather than treating the tariffs as a pre-emptive strike in a trade war,” Eurointelligence said.
(1 dollar = 0.9312 euros)
(Additional reporting by Inti Landauro and Belen Carreno; Writing by Charlie Deveraux; Editing by Elaine Hardcastle)
