Well, you can’t cast doubt on the might that China now has on the world. Because in direct response to taxes recently imposed on the imports of Chinese solar equipment, they’ve announced that their response will be taxes on alcohol – wine in particular – imported into China from the EU.
This battle has been rumbling for a long time now, and on Tuesday the EU announced their decision to charge new duty tax on imports from the Chinese. The announcement has not been well received, and in retaliation the Chinese have accused the EU of ‘dumping,’ when it comes to the sales of wine. This, according to Wikipedia, is the process of ‘predatory pricing, especially in the context of international trade,” and occurs “when manufacturers export a product to another country at a price either below the price charged in its home market, or below its cost of production.”
Okay, so we could talk at length about the whys, wherefores, dos and don’ts of trading and pricing, but that’s not the issue here. What we’re interested in is how this might affect the trading industry between China and France in relation to wine, and cognac in particular. After all, the Chinese market is a substantial one for eaux-de-vie, and one that the cognac houses have all come to rely on with the Chinese penchant for old and valuable cognacs. China is the No.1 future market for Cognac, Asia being already the most important region in terms of value.
Early reports are that import taxes (to china) will most likely affect the wine and spirits industry. However, it remains unclear as to whether cognac will be included in this threat. France is the premier importer of wine into China, with 140 million litres of wine sold to the country in 2012. It represents the third largest export market for France when it comes to wine, and as such has a major effect on jobs in the industry, both directly and indirectly.
President Hollande has requested a meeting of the 27 EU member states to talk about a “solidarity” on trade negotiations with China. Fabrice Latour, President of the FEVS has said, “The exploitation of our industry in a trade dispute is particularly regrettable, especially as the wine sector is a good example of an activity whose dynamism is related directly to exports, including China.”
Let’s keep in mind that the Chinese cognac market is pretty much driven by premiumization. If the taxes on Cognac should go up, the Chinese consumer would have to pay for it or/and the locally established cognac companies would have to accept lower margins.