2022 has been a record year for EU spirits exports, as an increasing number of countries have fully re-opened after two years marked by covid-related restrictions. For the first time, the value of exports reached €9.74 billion – an increase of almost +16% compared to last year. This increase is noticeable in nearly all of our top 10 export markets, particularly in the Philippines, South Africa, and the United Arab Emirates, which have all registered growth well above +40% in value. While the positive result gives us reasons to rejoice and feel confident about the future, 2023 could prove a lot more challenging, with growing geopolitical tensions, the war in Ukraine, high inflation, slower growth prospects in Europe & the US, and growing protectionism.
In the difficult and unpredictable times that lie ahead, we cannot afford to damage access to our first two export markets, the US and China. With the US, we need to put the disputes of the past behind us and ensure that retaliatory tariffs that have been suspended temporarily in the frame of the steel & aluminum and Airbus-Boeing disputes are removed once and for all. The focus should be on developing a positive transatlantic agenda instead.
A balanced relationship with China is equally important. It is neither viable nor in Europe's interest, to decouple from China, which is a vital trading partner for the EU, in President von der Leyen’s own words. Past examples show that regulatory cooperation with China can deliver mutual benefits, and we would like to see more of that, with a particular focus on alcoholic beverages – which is an area of mutual interest.
In an increasingly volatile world, we need support to diversify exports and ensure that we are not overly reliant on a small number of trade partners. Currently, well over half of EU spirits exports (in value) are shipped to just 3 countries: the US, China and the UK. Without neglecting these critical markets, we need better access to a wider range of options for exports, with a focus on high-growth emerging countries. This is fully in line with the objectives expressed in the Green Deal Industrial Plan & the focus of open strategic autonomy. For export-driven sectors like ours, this is not only prudent, but a matter of long-term resilience, and possibly even survival.
At a time when many of the EU’s allies and competitors have joined CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership), the relative lack of agreements & formalised structures for cooperation between the EU and ASEAN countries is a gap that needs to be closed urgently. We cannot implement the EU Indo-Pacific Strategy & support a further diversification of our exports & imports without fast progress on forging closer links with ASEAN countries. Besides, as CPTPP continues to grow, we risk being placed at an increasingly competitive disadvantage with those countries that have joined CPTPP – many of which happen to be significant producers of spirits. Cooperation with ASEAN should focus on a dynamic FTA agenda with ASEAN countries, closer regulatory cooperation – beyond clean tech & digital – and a joint strategy to tackle illicit trade.
We also need to see progress in negotiations with India – both for strategic and economic reasons – but without compromising on the quality of the market access dimension of the agreement. India is the second biggest spirits market in the world after China – yet, we export almost 15 times less to India than we do to China, largely due to import duties of 150% on our products and prohibitively high taxation at state level.
We also need to see more progress towards ratification of the EU-Mercosur agreement, if we do not want to lose our first-mover advantage in the region. We fully stand behind this FTA, which is both an instrument to reinforce strategic links and cooperation with the Mercosur bloc and a means to further diversify EU exports and imports. For spirits, it would be a game changer in the region – particularly in Brazil, which is the most promising market in the bloc.
Last but not least, we need to deepen the trade & regulatory links with Sub-Saharan Africa, with a focus on high-growth markets such as Nigeria and Kenya, without neglecting existing key partners like South Africa. As spirits, we are still excluded from too many EPAs in the region – which needs to change. We also want to see more cooperation in the fight against illicit trade – which extends well beyond the African continent.
A more active FTA & cooperation agenda, together with more robust enforcement of commitments by third countries & a dynamic and inclusive promotion policy are the essential ingredients we need to realise the vision of open strategic autonomy & secure the long-term resilience of our economy – in spite of the challenges that lie ahead.
Ulrich Adam, Director General*
*In his capacity as permanent representative of SPRL ADLOR Consulting
