Up to 78,600 jobs in the U.S. beverage alcohol and hospitality sectors could be lost if distilled spirits, wine and non-alcoholic beer are included on the final U.S. list of European Union (EU) products targeted for retaliatory tariffs, according to an analysis in a submission to the United States Trade Representative (USTR) by U.S. alcohol trade groups.
To be sure, that 78,600 job loss estimate assumes a 100% tariff. But even a 10% tariff would cost 11,200 U.S. jobs, and a 25% tariff would cost nearly 26,200 U.S. jobs, the submission says.
The proposed retaliatory tariff 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 joint comment was submitted by U.S. alcohol trade groups representing several beverage alcohol suppliers, wholesalers, importers and retailers. In the submission, the groups reaffirmed their strong objection to tariffs and the inclusion of EU spirits and wines on the preliminary retaliation list emphasizing that it “will lead to negative unintended consequences for U.S. consumers, will cause a further decline in U.S. beverage alcohol exports and will result in a significant loss of U.S. jobs.”
The comment notes that “U.S. beverage alcohol exports have been a great American export success story. Total U.S. distilled spirits exports, for example, have grown from $496 million in 1998 to $1.8 billion in 2018, representing an increase of 261%. In 2018, U.S. distilled spirits were exported from 45 states across the United States.
“Exports of U.S. craft distilled spirits, in particular, reached 598,000 cases in 2017, adding more than 7.7% of the additional volume to U.S. craft distillers’ total sales. Exports of craft U.S. distilled spirits in 2017 grew by 5.7% versus the previous year. “U.S. wine exports have grown 174% by value from $531 million in 1998 to $1.5 billion in 2018. In 2018, 6,009,978 barrels of beer were exported worldwide from the United States.
“However, this extraordinary growth may be at risk due to the retaliatory tariffs imposed by key trading partners on American wine and spirits exports in response to unrelated trade disputes,” the comment says.
Because of the market-opening commitments concerning beverage alcohol made by both the U.S. and EU governments and in order to satisfy consumer demands, many companies within the industries have become very interconnected, with companies owning both U.S. and EU spirits, wine and beer brands.
They explained that imposing retaliatory tariffs on EU wine and spirits products harms both the U.S. and EU alcohol sectors since many companies have created complementary product portfolios comprised of both domestic and imported spirits, wine and beer brands to meet consumer demand.
According to the analysis, approximately 11,200 to 78,600 U.S. jobs could be eliminated if the U.S. moves forward in slapping tariffs on spirits and wine products imported from the EU. This estimate is a significant increase from the loss of jobs estimated in the group’s May 28th submission due to USTR’s decision to add Scotch Whisky and Irish Whiskey to its April 8 preliminary list of EU products, which included wine, liqueurs and cordials, and Cognac.
“If beverage alcohol products remain on the final U.S. list, the EU would certainly respond by keeping U.S. beverage alcohol products on its list, thus inflicting more damage on U.S. companies that export to this critically important market and hampering the export progress that has benefited our sectors and created good paying jobs across the U.S,” the groups stated. The EU has threatened to impose tariffs on imports of U.S. wine, vodka, and rum.
The groups underscored that the impacts of retaliatory tariffs are accelerating and are being felt across the entire U.S. supply chain, from farmers to suppliers to retailers.
Since the EU’s imposition of a 25% tariff on American Whiskey last summer, American Whiskey exports have declined 19%. Additionally, China is imposing a 54% retaliatory tariff on U.S. wine imports, which is contributing to a 57% decline in trade with China since the beginning of 2019.
Several small U.S. distillers and vintners have had their export orders cancelled due to the tariffs and as a result have put a hold on hiring and have cut back on grain purchases.
“Once a market is lost it is very difficult and costly to regain. This is particularly true for small importers who have built a niche U.S. market or U.S. craft distillers, wineries, and brewers who have built a meaningful export market in the EU. In fact, they may never regain the lost market share and may be forced to close their U.S. operations,” the comment notes.
The joint comment was submitted by the Distilled Spirits Council of the United States, American Craft Spirits Association, American Distilled Spirits Association, Kentucky Distillers’ Association, Wine Institute, WineAmerica, Wine & Spirits Wholesalers of America, Wine and Spirits Shippers Association, American Beverage Licensees and the National Association of Beverage Importers.