The decision by the World Trade Organisation (WTO) in the Boeing case is expected to happen next month and will likely recognize – as was the case for Airbus – the existence of illegal subsidies. This step risks triggering a new round of retaliatory action between the EU and the US – which would be the 4th since 2018. Unfortunately, spirits have found themselves caught up in the middle of 2 of the 3 previous rounds: after the US had imposed tariffs on European steel and aluminium in early 2018, the EU imposed – inter alia – 25% tariffs on US Bourbon whiskey imports in June 2018. The WTO’s decision on Airbus in 2019 then gave the US the right to retaliate by imposing – inter alia – 25% tariffs on some of the most iconic EU spirit drinks.
The highly complex nature of this longstanding dispute is more than obvious today. The European Commission should, therefore be applauded for its tireless efforts in recent months to resolve it. Yet one thing is clear: the spiral of further escalation needs to stop now – at the very least for entirely unrelated sectors like ours. Being caught up in the middle of an unrelated trade dispute about civil aircraft is not something a sector like spirits can afford in the face of the devastating impact of the COVID crisis: with lockdowns on both sides of the Atlantic, bars, restaurants and travel retail stores have been closed, causing huge losses to our partners in the hospitality sector and to us.
We have felt the heavy economic pain of tariffs already before the COVID-19 crisis: the imposition of EU tariffs in 2018 caused US Whiskey imports to fall by 27%. And the imposition of US tariffs in October 2019 has caused similar drops in exports of the affected European spirits.
Exerting further collateral damage on us would no longer be proportionate or economically feasible. This was confirmed by last week’s study from the Kiel Institute prepared for the Family Business Foundation in Germany. In light of the continuing damage to unrelated sectors, the authors recommend a European compensation fund, which should be located at EU level for reasons of state aid.
As the spirits sector, we strongly believe in the positive role of international trade and how it can accelerate the recovery and get our economies moving again. For this to happen, we need a free and fair flow of goods, and certainty to invest and trade. Never has it been more urgent for the EU and US to find a negotiated solution to their trade disputes than now. We need #ToastsNotTariffs!
