Trade groups representing several beverage alcohol suppliers, wholesalers, importers and retailers urged the U.S. Trade Representative (USTR) to remove spirits, wine and non-alcoholic beer produced in the European Union (EU) from its list of EU products being targeted for proposed retaliatory tariffs.
The preliminary list of targeted EU products, which was announced by the USTR April 8, includes brandy, liqueurs and cordials, wine and non-alcoholic beer, as well as many other EU products. The issuance of the proposed list is part of a long-standing dispute at the World Trade Organization (WTO) regarding civil aircraft subsidies and is unrelated to the beverage alcohol industry.
The EU responded to the U.S. draft list with its own preliminary list of U.S. products that it would target for retaliatory tariffs in a related WTO dispute, which included wine, rum, vodka, and brandy.
The groups stated, “We are gravely concerned that this escalation would compound the negative impact of the tariffs on a sector that is already feeling the damaging impact resulting from unrelated trade disputes.”
In the submission, the groups stated they “strongly oppose the inclusion of beverage alcohol products in the proposed retaliation list” and warned that the tariffs will have numerous unintended negative consequences, including on U.S. jobs, U.S. consumers and on U.S. companies that export to the EU, some of which already face retaliatory tariffs to that market.
Looking at brandy as just one example, the filing said the proposed retaliatory tariffs would impact nearly $1.4 billion in brandy imports from the EU. The proposed retaliatory tariffs on liqueurs and cordials would impact nearly $800 million and noted that imports from Ireland, such as Irish Cream Liqueurs, account for nearly 34% of the total value and volume of liqueur and cordial imports from the EU while imports from Germany account for nearly20% of volume and 15% of value.
A 10% tariff on specified EU wine and distilled spirits would cost more than 6,600 U.S. jobs, the group’s analysis says, while a 25% tariff would result in loss of nearly 15,400 U.S. jobs and a 100% tariff would cost nearly 45,800 jobs while increasing the cost of the imported Cognac by 63%, liqueurs and cordials by 55% and wines by 72%. .
The groups pointed out that many U.S. companies–from farmers, to suppliers to retailers–are already being negatively impacted by the imposition of retaliatory tariffs by key trading partners on certain U.S. distilled spirits and wines resulting from other trade disputes, and that additional tariffs will only inflict further harm.
The analysis warned the EU will not stand by and allow the U.S. to impose the tariffs, but will respond with additional levies on U.S. products.
The EU is the largest export market for U.S. wine, but citing what has happened in China, the groups warn trade with the EU could fall as much as 67%.
As for American whiskey, exports to the EU totaled $704 million in 2018, representing 59% of global American Whiskey exports. Following U.S. imposition steel and aluminum tariffs, the EU imposed a retaliatory tariff of 25% on all U.S. whiskeys. The result: American Whiskey exports to the EU have fallen 15% between July 2018 through March 2019 from the like year-earlier period.
The EU has made it clear it will impose stiff tariffs on U.S. bev/al products if the proposed tariffs are implemented.
The groups noted that distilled spirits exports have grown to $1.8 billion last year from $496 million in 1998, an increase of 261%. Craft distillers in 45 U.S. states exported 598,000 cases of craft spirits last year, representing 7.7% of total craft sales. Wine exports have grown 174% in value during the period.
Since the dispute involves civil aviation products, the groups said, any retaliatory tariffs should also be imposed only on civil aviation products.
The joint comment was submitted by the Distilled Spirits Council of the U.S., American Craft Spirits Association, American Distilled Spirits Association, Kentucky Distillers’ Association, Wine Institute, WineAmerica, Wine & Spirits Wholesalers of America, American Beverage Licensees and National Association of Beverage Importers.