(Bloomberg) --
The European Union and France will support cognac makers — potentially with financial aid — that have been targeted by China in an escalating trade dispute, according to the French minister for European affairs, Benjamin Haddad.
Paris is facing the brunt of retaliation against the EU’s decision to impose tariffs on imports of Chinese electric vehicles over what it says are unfair subsidies. Beijing said this week it will start collecting duties as high as 39% on cognac imports, most of which come from France.
Haddad said China’s decision to institute levies on cognac makers was illegal and that the European Commission was taking steps to protect the sector.
“All the cognac producers have been very upfront and very transparent in the investigation — there’s no subsidy or illegal practice by them,” Haddad said in an interview with Bloomberg TV. “We will put forth a compensation mechanism” to help cognac producers, he added, referring to possible action by the commission.
Shares in Remy Cointreau SA and Pernod Ricard SA accelerated gains after the comments. Remy rose as much as 3.2%, while Pernod added as much as 0.5% after reversing an earlier decline. The broad French SBF 120 index also turned positive and was up 0.2% at 12:19 p.m. Paris time.
Thomas Helaine, head of equity sales at TP ICAP in Paris, said the minister’s comments had encouraged some clients to reinvest in Remy.
“Other clients believe it’s too early to go back in given the international trade tensions, but we don’t,” he said. “It’s all muscle flexing, it should calm down in the end.”
The EU and China have said they will seek to avoid a trade war and the bloc indicated it will challenge the cognac measures at the World Trade Organization. Shares of French distillers fell immediately after China’s Oct. 8 announcement, with Remy falling as much as 9.3% and Pernod 4.6%.
In its response to the cognac tariffs, the commission said it would “identify and assess all possibilities to offer appropriate support to EU producers facing the negative impact of this unwarranted decision.”
The EU has various options to support the sector in exceptional circumstances, including its agricultural reserve. This fund has a yearly allocation of at least €450 million ($493 million) and has been used to aid farmers after Russia’s invasion of Ukraine as well as earlier this year to provide emergency support in several member states affected by frost.
Other forms of help are available through the bloc’s common agricultural policy. One challenge may be that the funds available are limited and anything provided to one sector is likely to be requested by others targeted by Beijing, such as dairy and pork.
Level Field
Haddad also said that the EU needs to be ready to protect its interests as China and the US revert to isolationist trade practices.
“We want a level playing field on trade,” he said in the interview with Kriti Gupta, Guy Johnson and Anna Edwards. “There’s no reason why Europe should be more naive or should less defend its interests than its other trade partners.”
Haddad, 38, who was first elected to parliament in Paris in 2022 and has worked for think tanks in Washington, including at the Atlantic Council, also said that it was key for France to cut its deficit to remain a credible EU partner in negotiations.
At the same time, Europe is getting ready for a possible return of Donald Trump, who directed tariffs at Europe, to the White House. Some of the Trump-era disputes between Europe and Washington, including on steel and aluminum, are still on hold.
“I regret that we’ve seen some of the same protectionism under this administration as under the previous administration,” Haddad said. “I do hope that whatever comes out of the US election, we’ll keep a partner we can have a robust dialog with, but I also fear that we’ll see a trend toward protectionism, toward isolationism.”
He said that it’s important for Europe to stay united in order to further the bloc’s trade and geopolitical interests.
But if other countries revert to isolationism, he said, “Europeans shouldn’t hesitate to be able to defend their own interests.”
--With assistance from Alberto Nardelli.
(Updates with possible EU support measures from the ninth paragraph.)
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