Europe's cognac industry will be "breathing a sign of relief" after China opted out from imposing a provisional anti-dumping subsidy on brandy imported from the EU, an industry analyst has said.
AJ Bell investment director Russ Mould noted that when it was first announced earlier this year, the threat of an anti-dumping subsidy led to declines in the share price of Rémy Cointreau, Pernod Ricard and Diageo, firms boasting strong cognac sales in China, "representing another point of tension between the Asian country and the West. These tit-for-tat trade disputes have centred upon accusations of unfair competition and protectionism."
'Anti-dumping' duties are additional import taxes imposed on foreign goods sold below their normal market price, aimed at protecting domestic industries from unfair competition.
“Asia is a big market for spirits and European companies should welcome the latest development as it effectively removes a key sales risk," Mould commented.
Ongoing Investigation
Also commenting on the news, Cedric Lecasble, an analyst with Stifel, said that while the announcement "should come as a relief in a European spirits sector lacking good news", cognac exporters aren't out of the woods just yet.
"The investigation is still ongoing and the risk of seeing tariffs applied is still very real," he said. "An investigation could take up to a year and a final decision is still expected by early 2025 at the latest."
Unjustified Market Access Barrier
Elsewhere, Ulrich Adam, director general of spiritsEUROPE, said that the group was "stunned by the level of provisional duties announced", which average 34.8%.
"We are of course pleased to see that China has – for now – decided not to apply these provisional duties," Adam told ESM. "However, it remains up to China to decide if/when provisional duties may be applied and it remains to be seen if/when final rates may be announced and possibly applied in the future."
If applied, the tariffs would create an unjustified market access barrier and significantly harm EU exports of wine-based and marc-based spirits to China, spiritsEUROPE noted.
These categories make up about 90% of the value of direct EU spirits exports to China, meaning that such tariffs could severely impact the European spirits industry’s presence in the Chinese market.
