Diversification and open trade: our best protection against geopolitical tensions and economic volatility
“A world that turns its back on open and predictable trade will be one marked by diminished competitive pressures and greater price volatility. It would be a world of weaker growth and development prospects, a slower low-carbon transition, and increased supply vulnerability in the face of unexpected shocks.” This statement, from WTO Director-General Ngozi Okonjo-Iweala, rings especially true today. Trade is not a zero-sum game and it does not only benefit the few. It is a major driver of growth, with both exports and imports supporting countless jobs around the world. In the EU alone, 1 in 5 jobs depend on exports. EU exports support in turn a further 24 million jobs outside the EU, including in many developing countries.
As an export-driven sector, the EU spirits sector is well-placed to showcase the benefits of international trade. Over 60% of EU spirits exports in value were destined for third countries in 2022, with international exports to third countries worth €9.74 billion that year. This percentage was significantly bigger for some particularly iconic geographical indications, such as Cognac, Irish Whiskey, or Swedish Vodka. For our sector, and many others with a strong reliance on exports, international trade is a matter of survival. Countless spirits producers, not least SMEs, depend on it. With over 250 Geographical Indications in the EU, which represent 2/3 of our exports in value, EU spirits support many of the continent’s rural areas and contribute to reinforcing the positive global reputation of European food and drink products, based on a combination of high standards, rich traditions and continued innovation. Most importantly, our sector is a good example of how exports from one region can support thousands of good quality jobs in third countries – including developing regions - in distribution, logistics, tourism, and the hospitality sector, contributing to sustainable development in the process.
But deeper trading relationships can deliver much more than just economic benefits. Modern-day trade agreements can act as agents of sustainable change and contribute to achieving the UN’s Sustainable Development Goals (SDGs), by encouraging higher production standards and more sustainable practices worldwide. It is through diplomatic persuasion, dialogue, and partnership with others, where possible at a multilateral level, that we can best improve mutual understanding, bridge existing gaps in positions, and trigger real change.
With so much to go in its favour, surely supporting open trade & diplomatic cooperation with as many partners as possible should be a no-brainer. Unfortunately, this is less and less the case. Trade is increasingly being taken hostage by more political considerations, blamed for domestic problems and challenges, and perceived as a source of vulnerability rather than an asset. The sirens' calls of protectionism, reshoring, and unilateralism are becoming stronger and stronger, with security and geostrategic concerns tending to dominate the debate. In doing so, we forget that openness is our only viable long-term option if we aspire to remain relevant both economically and geopolitically.
Looking back, 15 years ago, the EU represented one-quarter of global consumption spending. Today, this share is down to 18%, and it will be under 10 percent in a decade from now. In other words, most growth is happening elsewhere: 85% of projected growth is set to originate outside the EU borders in the next 10 years. To benefit from this growth in Europe, we need to be connected to it and that is the reason why now, maybe more than ever, we need an ambitious EU trade policy. Without looking so much into the future, all indicators for 2023 so far point to a difficult year, due to growing inflation and sluggish growth, coupled with an increasingly volatile environment and rising geopolitical tensions. The safest path, the only path forward, lies in diversification, as an engine of resilience.
Today, looking at EU spirits exports, three markets continue to dominate, representing 56% of our exports in value in 2022: the USA, China and the UK. These will remain essential markets for EU producers, but also significant players in the global system and unavoidable partners and interlocutors for the EU. The transatlantic relationship alone represents 39% of EU spirits exports. While we need to maintain a positive and constructive relationship with these important trade partners, using dialogue and trade diplomacy to resolve our differences, we cannot remain complacent and only focus on a handful of traditionally strong markets. We need to diversify, focusing on high-growth areas.
ASEAN, India, Sub-Saharan Africa and Latin America (particularly the Mercosur regions) are emerging regions to which we need to be closer both for economic and geostrategic reasons. This includes ensuring that we negotiate ambitious trade agreements providing for meaningful market access for both sides, as well as regulatory cooperation. In doing so, we will also continue supporting rural areas and delivering growth and jobs in the EU and abroad – both directly and in upstream and downstream sectors, including logistics, retail and the hospitality sector.
