Following Chinas announcement of a countervailing investigation into EU-origin dairy imports, the EU dairy industry has expressed strong concerns, with Ireland reacting most prominently. ICMSA President Drennan warned that if the trade dispute affects Irelands dairy and butter trade with China, the association will demand EU compensation for dairy farmers. The Irish Farmers Association and other agricultural groups also voiced concerns, stressing that Irish dairy farmers should not bear the brunt of trade disputes.

Who Is Most Affected?

The most affected countries are likely to be major EU dairy exporters such as Ireland, Germany, and France:

(1) Ireland:As one of the major dairy exporters in the EU, Irelands dairy exports to China amount to approximately €420 million, accounting for 7% of its global dairy exports. The Irish Farmers Association stated that the investigation primarily involves cheese, cream, and other processed cheese products, with exports valued at around €45 million. Irelands reliance on the Chinese market has made its response to this countervailing investigation particularly strong.
(2) Germany:Germany is the largest producer of milk, butter, and cheese in the EU and the biggest exporter of dairy products to China. The German Dairy Industry Association, representing the sector, indicated that cheese and cream products may be disproportionately affected, expressing concerns about further escalation in trade tensions with China.
(3) France:Although France was not individually listed in the subsidy investigation, it faces potential risks as the second-largest supplier of cream to China. The French National Dairy Association emphasized that France is also part of the EUs Common Agricultural Policy subsidy investigation.

Which companies and products are most affected?

(1) Dairy producers:EU dairy companies reliant on exports to the Chinese market will be directly impacted, particularly those producing cheese, cream, and related products. These companies may face increased tariffs, affecting their competitiveness in China.
(2) Specific product categories:Milk powder, cheese, butter, and cream will be the most affected categories in this countervailing investigation. Zhao Yongsheng noted that alternative dairy products (e.g., from Australia, New Zealand, and Russia) may gain a competitive edge in China due to lower costs.
(3) Trade groups and farmer organizations:European dairy lobby Eucolait and other agricultural organizations regret the industrys entanglement in trade conflicts and worry about the EUs reputation as a reliable dairy supplier to China.

Summary

This countervailing investigation has broad implications and is expected to significantly impact dairy exporters across multiple EU member states, especially Ireland, Germany, and France. Irelands reaction is particularly strong due to its global dairy export prominence and heavy reliance on China. While the investigation involves around €1.7 billion, it signals Chinas reciprocal measures against EU trade policies. Both sides will have two months to negotiate and resolve trade disputes.