US drinks companies risk being “collateral damage” in Boeing trade spat, USTR warned

The US wine and spirits industry risks becoming “collateral damage” in the US’s ongoing spat with the EU over civil aviation, representatives of the industry warned the US Department of Trade this week, arguing that retaliatory tariffs could result in up to 78,000 US jobs being lost.

Concept of American wine industry. Close-up studio shot in selective focus of one clean wine cork with small paper American flag planted in it, with crowd of multiple different cork bottle stoppers blurred in background, on white background with light and shadow effects. There is a basic illustration of vine grape plant, created and merged by the photographer in post processing.

In a joint statement signed by a collection of US alcohol trade bodies timed to coincide with the USDT hearing on Monday, the industry urged the department not to include distilled spirits, wine and non-alcoholic beer on the final list of EU products targeted for retaliatory tariffs in response to a long-standing dispute at the World Trade Organization (WTO) regarding civil aircraft subsidies.

In April, the US government identified $21 billion-worth of EU good imports it said could be subject to tariffs in the culmination of the 14-year trade dispute between EU aerospace and defence group Airbus and US company Boeing, following the WTO ruling last year that EU subsidies Airbus were illegal.

In response, the EU is threatening to impose tariffs on imports of U.S. wine, vodka, and rum.

However, the organisations argued that a trade war would have unintended consequences and could cost up to 78,000 jobs across the US drinks industry.

“If beverage alcohol products remain on the final US list, the EU would certainly respond by keeping U.S. beverage alcohol products on its list, thus inflicting more damage on US 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.

It pointed out that US alcohol exports from US had been “a great American export success story”, with the value of distilled spirits exports up 261% to $496 million and wine sales up 174% to $1.5 billion between 1998-2018.

“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,” it warned, adding that since the EU had levied a 25% tariff on American Whiskey last summer, exports had declined 19% and many small distilleries had reported cancellations or reductions in their EU export orders while the 54% tariff imposed by China on US wine imports had seen trade fall by 57% since the beginning of the year.

Signatories included the Distilled Spirits Council of the United States, Kentucky Distiller’s Association, Wine Institute, American Craft Spirits Association, WineAmerica, Wine & Spirits Wholesalers of America, the National Association of Beverage Importers (NABI), American Beverage Licensees, Wine and Spirits Shippers Association, and the American Distilled Spirits Association.

“We strongly urge the United States and the European Union (EU) to de-escalate the current trade disputes, secure the removal of the EU’s 25 percent retaliatory tariff on American Whiskey and reach a negotiated settlement in this dispute and avoid the implementation of new tariffs in connection with the World Trade Organization (WTO) dispute against the EU and certain EU members state,” it said.

The president and CEO of the Distilled Spirits Council of the United States Chris Swonger and president of the National Association of Beverage Importers  Robert Tobiassen testified at the hearing.

Tobiassen told the hearing that around 95% of its members were small or medium-sized family-owned and regionally-based US companies purchasing from small producers in Europe of second-tier brand names and as such, would not be able to absorb increased costs.

“They do not have markets on multiple continents where they can generate a profit centre to offset the losses that they will suffer here in the United States from lost sales due to the proposed retaliatory tariffs,” he wrote. “Lost sales means lost market share that they may never be able to recover.”

He argued that as a dispute over civil aircraft and aeronautic equipment, rather than alcohol beverages,  better tariff solution against Airbus were available.

In June, US and EU members of international grower organisation Wine Origins Alliance wrote to their respective trade representatives calling for the scrapping of proposed tariffs on EU wine, and urging the countries’ trade representative to work together to reduce and eliminate tariffs.

Last week President Trump reignited his earlier threats to impose tariffs on French wine in retaliation to France imposing a tax on global technology companies.