RELIEF FOR ALCOHOL PRODUCERS AS PUNITIVE TARIFFS BETWEEN US AND EU/UK ARE SUSPENDED FOR 5 YEARS
The US has agreed separate deals with the European Union and the UK to suspend retaliatory tariffs affecting alcohol exports (among others) which relate to a long-standing trade dispute over civil aircraft support and subsidies.
According to the EU, the five-year suspension adds up to roughly $11.5 billion on both sides of the Atlantic, indicating just how harmful the tariffs have been up to now. Following World Trade Organization decisions, both the US (in October 2019) and the EU (in November 2020) imposed punitive tariffs on each other’s exports including wines and spirits, dairy and cheese of up to 25%. As a result, EU and US businesses have had to pay over $3.3 billion in duties.
European Commission executive vice-president Valdis Dombrovskis said: “With this agreement, we are grounding the Airbus-Boeing dispute. We now have time and space to find a lasting solution through our new working group on aircraft, while saving billions of euros in duties for importers.”
The deal ensures that the EU will suspend 25% tariffs on US brandy, rum and vodka for five years while the US will suspend its 25% tariffs on liqueurs and cordials from Germany, Ireland, Italy and Spain, and on certain Cognacs and other grape brandies from France and Germany.
Unilateral step from UK on tariffs
Meanwhile, earlier this year, the UK unilaterally suspended retaliatory tariffs on the US which encouraged the US to agree to a four-month suspension of tariffs on single malt Scotch, single malt Irish whiskey from Northern Ireland, liqueurs and cordials, and some wines. The suspension was due to expire on 4 July. However, on the heels of the EU’s five-year deal, the UK announced a similar agreement.
International trade secretary, Liz Truss, said: “This deal is fantastic news for major employers like Scotch whisky and sectors like aerospace. We took the decision to deescalate the dispute at the start of the year when we became a sovereign trading nation, which was crucial to breaking the deadlock and bringing the US to the table.”
According to the Scotch Whisky Association, the past two years have been extremely damaging for the industry with the loss of over £600 million ($830 million) in single malt Scotch whisky exports to the US caused by the 25% tariff.
Chief Executive of the SWA Karen Betts said: “This deal removes the threat of tariffs being reimposed on Scotch whisky next month and enables distillers to focus on recovering exports to our largest and most valuable export market. But she added: “Given, however, that this deal suspends tariffs rather than fully resolving the underlying dispute, what’s critical now is that the governments and aerospace companies on both sides stick to their commitments and work with one another constructively.”
In the EU, Brussels-based Spirits Europe – a body representing the interests of 29 associations of spirits producers as well as 10 multinationals – applauded the five-year suspension. Director general Ulrich Adam said: “This decision is a major step and we remain confident it will lead to the eventual resolution of the underlying dispute, while providing welcome relief to our sector and many others.”
He added: “It is now critical that remaining differences get resolved as soon as possible, so that all remaining tariffs on spirits may be removed for good and we may return to transAtlantic tariff-free trade in spirits, which we had enjoyed for almost 25 years prior to 2018.”
As a result of a separate dispute on steel and aluminium, American whiskies remain subject to tariffs on entry into the UK and EU and a resolution to this situation is likely to be next on the agenda. Since these tariffs were imposed in June 2018, American whiskey exports to the EU have declined by 37% and to the UK by 53% according to the Distilled Spirits Council of the US (Discus).
“Until steps are taken to permanently remove these tariffs on American whiskeys, the United States’ largest spirits export category will remain at a serious competitive disadvantage in our two most important export markets,” said Discus president and CEO Chris Swonger.