For more than two years, the spirits sector has found itself embroiled in an admittedly complex, yet totally unrelated, trade dispute between the EU and the US. The consequences for distillers on both sides of the Atlantic have been severe.
The EU’s 25% tariff on US Bourbon whiskey has caused exports to drop by a staggering 33% within the past two years, causing losses of well over US$300 million. Similarly, the imposition of a 25% US tariff on certain European spirit drinks since October 2019 is exerting a heavy impact on the affected distilleries across Europe.
As our sector struggles with the devastating economic consequences of the COVID crisis – and the temporary closure of bars, restaurants and travel retail stores that came with it – we can no longer afford to carry a disproportionate economic burden in a trade dispute that is meant to be about steel, aluminium and civil aircraft in the first place.
What we need policymakers to do is to focus on the core issues, find a negotiated solution, return to zero tariffs and thus help boost the recovery.
By contrast, the least thing we can afford right now is uncertainty and further escalation.
Unfortunately, this seems to be the direction in which we’re heading. As we approach the summer, more trouble could be on the way: the decision by the World Trade Organisation (WTO) in the Boeing case is expected for September. It will likely recognize – as was the case for Airbus last year – the existence of illegal subsidies. This step risks triggering yet another round of retaliatory action between the EU and the US – which would be the 4th since 2018. And spirits could, once again, be part of the equation.
In addition, the US administration announced last week the upcoming deployment of the so-called “carousel retaliation” whereby the US can periodically review and shift tariffs on different groups of goods. As part of this process, the US is considering imposing new tariffs on gin and vodka from the UK, Germany, France and Spain as of 12 August.
Any such measures would severely hit our recovery and stop us from helping to get our economies moving again. For this to happen, we need a free and fair flow of goods, and certainty to invest and trade.
We therefore urge the EU and the US to focus on the core issues of the dispute, go back to the negotiating table, and work out a political solution. More than ever, to enjoy this year’s summer, we need #ToastsNotTariffs!
Ulrich Adam*
Director General
*In his capacity as permanent representative of SPRL ADLOR Consulting
