China spares major EU cognac-makers in trade war

Beijing will exempt major French cognac producers while slapping duties of up to 34.9 percent on European brandy as of July 5 for a period of five years, the Chinese commerce ministry announced on Friday.

The duties will range from 27.7 to 34.9 percent, although Beijing will exempt major brandy producers Remy Cointreau, Pernod Ricard and LVMH’s Hennessy, which have committed to exporting their spirits above a certain price. The average duty comes in at 32.2 percent, which is below the provisional rate of up to 39 percent Beijing has applied since last October.

“The measures will still pose a significant barrier to legitimate trade,” spiritsEUROPE, an industry group, said in a statement.

The announcement adds to headaches already piling up in the lead-up to a summit in China on July 24 and 25. Beijing is reportedly expected to cancel the second part of the summit.

China issued its final ruling Friday in an investigation it started in response to an EU probe into electric vehicle subsidies that led Brussels to impose duties on Made-in-China EVs of up to 35 percent last October. The move targeted French luxury cognac brands, reflecting Beijing’s displeasure at France’s perceived support for the EV probe.

The European Commission said it regretted China’s decision: “Our view all along has been unchanging and very firm,” trade spokesperson Olof Gill said. “We believe that China’s measures are unfair, we believe they are unjustified, we believe that they are inconsistent with the applicable international rules and are thus unfounded.”

Gill added that China had not addressed concerns raised by the Commission, bilaterally or in consultations at the World Trade Organization. “Regrettably,” he added, the measures were “part of a worrying pattern of China abusing trade defense instruments, starting and conducting investigations on the basis of questionable allegations and insufficient evidence.”

In parallel, Beijing and Brussels have been negotiating on minimum import prices for electric vehicles for months — although they have yet to find an agreement.

“This decision marks the end of the anti-dumping investigation, but not the end of our efforts to ensure that all our exporters regain unhindered access to the Chinese market as quickly as possible,” said Florent Morillon, president of France’s cognac governing body BNIC.

The announcement came shortly before French Foreign Minister Jean-Noël Barrot was due to meet his Chinese counterpart Wang Yi, who is touring European capitals this week.

This story has been updated with comment from the Commission.