The American federal government this week is set to slap a 25 percent import tariff on Scotch single malt whisky, part of a much larger grouping of tariffs being put on European goods as a result of ongoing disputes “with the European Union over illegal subsidies to Airbus.” The awarding of these tariffs was granted by the World Trade Organization (WTO) in an “arbitration award” of $7.5 billion annually said to be the largest ever put forth by this trade body.
WTO findings, according to the Office of the United States Trade Representative, determined that “EU launch aid for Airbus is causing significant lost sales of Boeing large civil aircraft, as well as impeding exports of Boeing large aircraft to the EU, Australia, China, Korea, Singapore, and UAE markets.” It is the Trump administration’s belief that “massive EU corporate welfare has cost American aerospace companies hundreds of billions of dollars in lost revenue over the nearly 15 years of litigation.”
Said tariffs will be applied to “a range of imports from EU Member States, with the bulk of the tariffs being applied to imports from France, Germany, Spain, and the United Kingdom – the four countries [the United States holds] responsible for the illegal subsidies.” The tariffs are set to take effect October 18, just a few days after the WTO is expected to automatically approve an American request “for authorization to take countermeasures against the EU.”
“For years,” said U.S. Trade Representative Robert Lighthizer in a prepared statement, “Europe has been providing massive subsidies to Airbus that have seriously injured the U.S. aerospace industry and our workers. Finally, after 15 years of litigation, the WTO has confirmed that the United States is entitled to impose countermeasures in response to the EU’s illegal subsidies.
“Accordingly, the United States will begin applying WTO-approved tariffs on certain EU goods beginning October 18. We expect to enter into negotiations with the European Union aimed at resolving this issue in a way that will benefit American workers.”
Understandably the Scotch whisky industry, and the greater spirits community on a global level, are very concerned about this. The Scotch Whisky Association, the trade group representing whisky distilleries in Scotland, issued the following statement about this economic situation:
“We are very disappointed that the United States Government has announced a tariff of 25% on imports of Single Malt Scotch Whisky and Liqueurs from the UK. This is a blow to the Scotch Whisky industry. Despite the fact that this dispute is about aircraft subsidies, our sector has been hit hard, with Single Malt Scotch Whisky representing over half of the total value of UK products on the US Government tariff list (amounting to over $460 million).
“The tariff will undoubtedly damage the Scotch Whisky sector. The US is our largest and most valuable single market, and over £1 billion of Scotch Whisky was exported there last year. The tariff will put our competitiveness and Scotch Whisky’s market share at risk. We are also concerned that it will disproportionately impact smaller producers. We expect to see a negative impact on investment and job creation in Scotland, and longer term impacts on productivity and growth across the industry and our supply chain. We believe the tariff will also have a cumulative impact on consumer choice.
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“The Scotch Whisky industry has consistently argued against the imposition of tariffs in our sector. For the last 25 years, trade in spirits between Europe and the US has been tariff-free. In that time, exports of Scotch Whisky to the US and of American Whiskey to the UK and Europe have grown significantly, benefitting communities on both sides of the Atlantic, boosting investment, employment and prosperity for all.
“For this reason, the Scotch Whisky Association – alongside American and European spirits producers – has urged the EU and the US not to draw spirits into trade disputes that have nothing to do with our sector.
“We believe it is imperative that the EU and US now take urgent action to de-escalate the trade disputes that have given rise to these tariffs, to ensure that these latest tariffs are not implemented on 18 October, and to ensure that other tariffs – including on the export of American Whiskey to the EU – are removed quickly. In particular, the UK government must now work with both sides to urge a negotiated settlement and to ensure that these damaging tariffs do not take effect.”
Alongside this statement U.S. alcohol trade groups, in a prepared statement, also “urged an end to tariffs on EU distilled spirits…following the United States decision announced today to impose tariffs of 25 percent on imports of Scotch Whisky.” It is a collective belief that this action “further ensnarls the distilled spirits industry in a trade dispute that began last year when the EU imposed a 25 percent retaliatory tariff on American Whiskey in response to U.S. steel and aluminum tariffs. The EU is considering imposing more tariffs on additional U.S. spirits…as part of a separate WTO civil aviation subsidies dispute.”
Figures shared by domestic trade groups revealed that, since the EU’s retaliatory tariff went into effect on American whiskey, exports have declined 21 percent. On top of this, and in light of the fact of the international nature of many companies that produce whisk(e)y, such as Diageo and Beam Suntory, it is viewed that these new American imposed tariffs “will have numerous unintended negative consequences on U.S. jobs, U.S. consumers and the many U.S. companies that include EU…spirits such as Scotch Whisky…in their portfolios. ”
Put into a more solid way of understanding this from a facts and figures perspective, an analysis by the Distilled Spirits Council forecasts said tariffs on Scotch and other European liquor/wine imports “could impact nearly $3.4 billion in imports and could lead to a loss of approximately 13,000 U.S. jobs, including truckers, farmers, and bartenders and servers in the hospitality industry.”
Here as well is a raft of statements that we will leave you with from various industry trade groups across the spectrum of the American liquor industry:
Chris Swonger, President and CEO of the Distilled Spirits Council of the United States, stated, “The decision to impose tariffs on imports of EU distilled spirits is a devastating blow to the U.S. spirits industry. While we recognize the U.S. and EU are trying to solve long standing trade disputes, distillers on both sides of the Atlantic have become collateral damage in matters that are completely unrelated to our industry.
“As the important holiday season approaches, we urgently call upon the U.S. and the EU governments to get back to the negotiating table and return to tariff free trade with our largest export market.”
Michelle Korsmo, President and CEO, Wine & Spirits Wholesalers of America, said, “These tariffs stand to disrupt consumer-driven, industry-wide growth, and will negatively impact the family-owned businesses who import and distribute the nation’s wine and spirits. When free trade is compromised and business becomes more expensive to conduct, consumers are always left to pay for the damages by way of higher prices.”
Robert M. Tobiassen, President of the National Association of Beverage Importers, stated, “These tariffs will devastate, perhaps destroy, many small and medium sized family businesses importing these products into the United States. More than 12,000 importers hold Federal permits and provide solid middle-class jobs in their local communities selling brands of products demanded by consumers who should not be collateral damage by what is a pure civil aircraft dispute.”
Margie A.S. Lehrman, CEO, American Craft Spirits Association, said, “On behalf of our nation’s growing community of nearly 2,000 craft spirits producers, the American Craft Spirits Association urges the Administration to work collaboratively with the E.U. to ensure all American businesses, including craft spirits, prosper.
“The threat of additional retaliatory tariffs from the EU on American rum, vodka, and brandy imports from the U.S. will further limit our market access, directly affecting not just our distillers and their families – who collectively make up a workforce of more than 20,000 employees across the U.S. – but the farmers and agricultural partners who supply their grains, the manufacturing industry that has helped support our community as they grow, and the broader hospitality industry.”
Matt Dogali, CEO of the American Distilled Spirits Association, added, “These spirits come to the U.S. market through a supply chain of predominately U.S. owned and operated companies. This is a tax paid by American businesses and American consumers.”
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