I have served as Ireland’s representative of the EU Chamber of Commerce in China’s Supervisory Board for the past five years and at the recent annual general meeting on 31 May, I was struck by the very pessimistic outlook on relations between the EU and China.

The vice-president of the chamber noted that relations between the EU and China are at an “all-time low”.

This is a striking observation given some of the recent low points, such as COVID-19 and the previous fallout from the failure to complete the EU-China investment agreement in 2021.

The EU-China relationship is complex and far ranging, but we can boil the current issues down to two major facets of the relationships that are creaking the foundations of this crucial trade relationship.

First, despite China’s recent attempts to make it easier for international companies to do business in China, the market sentiment among European companies in China remains very negative.

I would refer you to the EU Chamber of Commerce position paper for further reading on this, but it basically boils down to the fact that hunger for European investment into China continues to fall. This is due to diminishing profit margins and because of the challenging business conditions, European companies are continuing to look to other markets and regions for development opportunities.

Electric vehicles

The second driver is related to China’s drive to export electric vehicles to Europe.

China is now considering a range of responses

The market is flooded with extra stock and consumer sentiment is simply not catching up as quickly as many may have expected.

Chinese companies that were bullish now seem jittery about the market.

Projects to develop battery facilities in China are on hold.

The EU has just announced a new range of tariffs targeted at companies accused of anti-competitive behaviour. The tariffs, which range from 17% to 30%, are company-specific and while not as heavy-handed as the US, are still very contentious.

China is now considering a range of responses. The government has already identified areas for retaliation and this includes food and agriculture.

The EU chamber’s president Jens Eklund has compared this fallout to watching a car crash in slow motion.

It is likely that Europe’s burgeoning pork exports to China will be affected in the coming six months as China launches a probe. This will occur just when the market for pork is picking up.

Ian Lahiffe.

Ireland accounts for 2% of China’s pork imports, but other member states like Spain and the Netherlands will be significantly affected.

Brandy and other iconic food products seem to also be in the crosshairs of Beijing.

Whether this current trade will affect the dairy industry is another matter, but this would be a major blow for Ireland.

While I believe that this current fracture is something that will be resolved, we are facing a future with China where we have to be mindful of the broad tension between China’s industrial export policies versus the promise of the expanding food imports required to feed China’s huge population.

Turbulent few months

The next few months will be turbulent, as the run into the United States general election can threaten further instability and the prospect of a Trump presidency will threaten huge levels of protectionism and further complicate things.

Despite Ireland having a strong relationship with China, the overall EU-China relationship is complex and, unfortunately, the prospects for stable and easier business conditions seem distant.

As ever, for Ireland’s food and agri exports, this underlines the importance of having well-diversified export markets and never to be overly reliant on one market or segment.