A Beverage Alcohol Tariff War Of 2020 May Not Yet Be Over

By June 30, 2020 the European aircraft manufacturer, Airbus had 208 aircraft orders on file, with 36 deliveries made in June of their A220, A320 and the wide-body A350 XWB models. Two A350-900 aircraft went to Iberia (Spain) and one each to Air France and to SAS, the carrier for Denmark, Norway and Sweden. On July 1, 2020 Airbus held a backlog of 7,584 aircraft in inventory, including 560 A350-XWB planes.

Citing harming tariffs imposed by the United States Trade Representative (USTR) and a “…difficult environment as a consequence of the COVID-19 crisis,” Airbus, recently announced a resolution to a 16-year long litigation between the company and the World Trade Organization (WTO).

The conflict had to do with Repayable Launch Investment (RLI) contracts between Airbus and France and Spain for the company’s A350 model, which the U.S. claims is nothing short of a subsidy to build the planes that compete with Boeing’s 777 model planes. 

In October 2019, USTR won a $7.5 billion award against Airbus at the WTO. Winning that case gave the U.S. the excuse it needed to impose a new 25% trade tariff on a variety of European Union products, which included beverage alcohol.

In a statement after the Airbus July announcement, the Distilled Spirits Council of the United States (DISCUS) expressed relief claiming “Distillers on both sides of the Atlantic have suffered enough.”  

According to DISCUS, the dispute and tariffs have brought Scotch Whiskey imports to the U.S. down by almost 33% between October 2019 and May 2020, compared with the same period a year earlier. Cordials and liqueurs fell, too, by about 23%. Wine imports from France, Germany and Spain fell by 44% during the period.

A European Union retaliatory tariff of 25% lowered American whiskey exports to Europe by 33%. To make matters worse, after the Trump Administration talked of increasing its tariff to 100%, the EU scheduled a 50% tariff increase for 2021.

The USTR deadline for comments concerning the proposed 100% tariff expired in late July 2020. DISCUS said as of July 22, “More than 2,000 comments opposing the proposed tariffs on EU spirits have been submitted so far through DISCUS’ Spirits United grassroots platform.”

USTR is expected to release a decision on August 12, 2020.

On July 27, representing the U.S. and European beverage alcohol industries, 17 associations submitted comments in opposition to the U.S. government’s proposed tariff increase (up to 100%) on distilled spirits, wine and beer imported from the EU and the United Kingdom (UK). Estimates are that an additional tariff will lead to a loss of approximately 13,700 to 95,900 U.S. jobs, depending on the percent increase of the tariffs. DISCUS seeks zero tariffs on both sides of the Atlantic.

The joint release was issued by: Distilled Spirits Council of the United States, spiritsEUROPE, Scotch Whisky Association, American Beverage Licensees, National Retail Federation, American Craft Spirits Association, American Distilled Spirits Alliance, National Council of Chain Restaurants, Kentucky Distillers’ Association, National Association of Beverage Importers, National Restaurant Association, U.S. Wine & Trade Alliance, WineAmerica, Wine Institute, Wine and Spirits Shippers Association, the National Association of Wine Retailers, and the Wines & Spirits Wholesalers of America (WSWA).

WSWA senior VP for communications and marketing, Michael Bilello, told Forbes: “This is an important and encouraging step in the right direction to ending punitive retaliatory tariffs on EU wine and spirits. However, until the WTO accepts the proposed measure and removes the United States’ legal justification for tariffs on EU goods, our industry remains threatened with increased or expanded tariffs.”

Bilello added, “It’s more important than ever to make sure the USTR knows how damaging these tariffs have been, especially when combined with the devastating effects of COVID-19 on the hospitality industry. WSWA will not stop fighting until all tariffs are lifted on our industry, and we hope USTR and our European trading partners share our urgency to come to a decision and end this dispute before it inflicts more harm on American businesses, workers, and consumers.”

In a recent development, more than 160 lawmakers sent a  letter to USTR Ambassador Robert Lighthizer, urging an end to the 25% tariff currently imposed and discourages any additional tariffs on EU wine and spirits products.