The alcohol industry has suffered collateral damage in a long-running dispute between the EU and US over aircraft subsidies: with several rounds of tariffs on unrelated goods – including alcohol – brought into force since 2019.
In October that year, the US imposed 25% tariffs on drinks such as French wine, Scotch and Irish whiskies; followed by the EU’s imposition of 25% tariffs on US alcohol such as rum, brandy, vodka and vermouth in November 2020; and US imposition on further EU goods such as Cognac in January 2021.
The US had been authorised to raise tariffs on $7.5bn on EU imports; while, EU tariffs covered some $4bn worth of US goods.
The EU and US announced at the end of last week that they have now agreed to suspend all retaliatory tariffs on EU and US exports related to aviation subsidies for four months: giving authorities time to resolve the dispute and marking a ‘reset’ in trade relations. “Removing these tariffs is a win-win for both sides, at a time when the pandemic is hurting our workers and our economies,” said European Commission Executive Vice-President and Trade Commissioner Valdis Dombrovskis, announcing the EU's position on Friday. “This suspension will help restore confidence and trust, and therefore give us the space to come to a comprehensive and long-lasting negotiated solution.”
'Hugely positive' step forward
SpiritsEUROPE, a trade body representing the EU industry, says the suspension of tariffs is a ‘hugely positive development and a crucial step towards a final and permanent resolution.’
Ulrich Adam, Director General of spiritsEUROPE said: “The step is a huge alleviation for all producers of those European spirits that were negatively affected by tariffs in the past 16 months and whose exports have fallen drastically as a result, hurting jobs and growth amidst a very difficult market situation marked by the COVID crisis.
“We hope that both the EU and the US will now be able to find a final and permanent resolution to the Airbus-Boeing dispute as well as also resolve the steel and aluminium dispute which still hurts US whiskey exports to the EU.”
The US Distilled Spirits Council says the decision signals a promising break-through; adding that the tariffs have left ‘much destruction to the spirits sector in their wake’.
“The suspension of these tariffs on spirits is happening at critical time for the US hospitality industry," says the organisation. "Lifting this tariff burden will support the recovery of restaurants, bars and small craft distilleries across that country that were forced to shut down their businesses during the pandemic.
“These tariffs have damaged what had been for many years a great American export success story. American Whiskey exports to the EU, our largest export market, grew from $502m in 2008 to $702m in 2018, an increase of 40%. Since the tariffs were imposed, our American Whiskey exports to the EU have declined by 37% and to the UK by 53%. Until steps are taken to address the dispute over steel and aluminum tariffs, American Whiskey — the US’ largest spirits export category — will remain at a serious competitive disadvantage in our two most important export markets.
“We commend the Biden administration for moving quickly to reset relationships with our trade allies and urge for a speedy resolution that eliminates all of these debilitating tariffs on spirits for good.”
Karen Betts, Chief Executive of the Scotch Whisky Association, added that the tariff suspensions comes as a relief to Scotch whiskey producers. “This is fabulous news, and our industry is delighted. The tariff on Single Malt Scotch Whisky exports to the US has been doing real damage to Scotch Whisky in the 16 months it has been in place, with exports to the US falling by 35%, costing companies over half a billion pounds.
“So today, everyone in our industry – from small companies to large – is breathing a sigh of relief. Suspending these tariffs – stemming from a transatlantic trade dispute that had nothing to do with us – and a return to tariff-free trade with the US means livelihoods and communities across Scotland will be protected. It means that companies can now really focus on recovery – on building back the American market as well as on building back global exports hit by the coronavirus pandemic.
“The UK government and the new US administration will now need to work hard on finding a negotiated settlement to this long-running aerospace dispute. We hope too that both governments will be able to find a rapid, pragmatic solution to the steel and aluminium dispute which still impacts US whiskey exports to the UK.”