The U.S. and the European Union this morning announced the start of talks to resolve the issue of global excess capacity in the steel and aluminum industries and said they “agreed to avoid changes in issues “that negatively affect bilateral trade,” including tariffs. The entire dispute should be ended by year-end, they said.
“This news couldn’t come soon enough,” said Distilled Spirits Council of the U.S. President/CEO Chris Swonger. “Distillers across the United States are breathing a huge sigh of relief after bracing for a 50% tariff on American Whiskeys in just a matter of days that would have forced many craft distillers out of the EU market.
“We recognize there is still work to be done to get EU and U.S. spirits back to zero for zero tariffs. We greatly appreciate the Biden administration’s ongoing efforts to resolve these longstanding trade disputes and reduce the economic pain felt by those industries unfairly caught in the middle, Swonger added.
Eric Gregory, president, Kentucky Distillers Association, called the announcement welcome news. “Distillers in Kentucky and across America were perilously close to a crippling blow on European exports,” KDA President Eric Gregory said. “This gives both sides some breathing room to return to free and fair trade and once again level the playing field for Kentucky’s signature spirit.
Tariffs imposed on U.S. spirits slashed Kentucky Bourbon exports 35% in 2020, with shipments to the European Union plummeting by nearly 50%. Sales to the UK, formerly Kentucky’s largest market in the EU, also have been decimated by 50%.
Distilleries in 36 states exported whiskey in 2020, with Kentucky ranking second behind Tennessee. Total American Whiskey exports reported a similar downturn, declining 29% from 2018 to 2020. U.S. whiskey exports to the EU fell sharply 37% in that time and sank 53% to the U.K.
“We are obviously thrilled that discussions have started and both sides are committed to resolving this issue by the end of the year,” Gregory said. “We look forward to getting back to zero tariffs and what we do best – crafting the finest Bourbon for all the world to enjoy.”
Meanwhile, responding to a question from Kane’s Beverage News Daily, the EU, said, “Our joint aim is to put an end to the WTO disputes following the U.S. application of tariffs on imports from the EU under section 232 under the previous administration. In this spirit, both sides have agreed to avoid changes that negatively affect bilateral trade. Therefore, the EU intends to temporarily suspend the application of the automatic increase of its rebalancing measures foreseen to enter in force on 1 June 2021. The EU and U.S. will engage in discussions expeditiously to find solutions to this dispute, end the imposition of tariffs and to tackle global excess capacity before the end of the year.
The announcement followed a virtual meeting Friday between U.S. Trade Representative Katherine Tai and European Commission EVP Valdis Dombrovskis.
“Our decision to temporarily suspend the automatic increase in the EU’s rebalancing measures against U.S. 232 steel and aluminum tariffs shows that we are walking the talk in our efforts to reboot the transatlantic relationship,” Dombrovskis said. “This decision affirms our determination to find effective joint solutions to this dispute which will end the tariffs imposed on the EU for reasons of national security and to tackle global steel and aluminum excess capacity, and preserve our critical industries.
“As early as December 2020, the EU reached out to the Biden administration with a plan for a renewed EU-U.S. agenda, and we are pleased to see this approach bearing fruit. By suspending our measures, we are creating the space to resolve these issues before the end of the year,” Dombrovskis said, adding:
“The EU is not a national security threat to the U.S. But the distortions created by global excess capacity-driven largely by third parties – pose a serious threat to the market-oriented EU and U.S. steel and aluminum industries and the workers in those industries.”