Scotch tariffs remain as US exports drop 30%

13th August, 2020 by Owen Bellwood

The Scotch Whisky Association (SWA) has condemned the US government’s decision to retain a 25% tariff on single malts, which has resulted in an almost £300 million (US$392m) loss for the industry.

The USTR will retain its 25% tariff on Scotch whisky

In October last year, the US imposed tariffs on numerous alcoholic beverages, including single malt Scotch, single malt Irish whiskey and European liqueurs, in response to a 16-year dispute regarding aircraft subsidies for European plane maker Airbus, which the US claims has hampered American producer Boeing.

In July, Airbus agreed to increase loan repayments to France and Spain in order to settle the dispute. At the time, it was hoped the move could have the potential to mitigate the tariff war.

However, the United States Trade Representative (USTR) has now said that the 25% tariff on goods including single malt Scotch, single malt Irish whiskey and liqueurs will remain in place.

Other tariffs have been removed. The USTR has ended tariffs on certain products from Greece and the UK. However, an equal amount of tariffs have been added to trade from France and Germany. The changes amount to US$7.5 billion and the tariff rates will remain unchanged at 15% for aircrafts and 25% for all other products.

Ambassador Robert Lighthizer said: “The EU and member states have not taken the actions necessary to come into compliance with WTO [World Trade Organization] decisions.

“The United States, however, is committed to obtaining a long-term resolution to this dispute. Accordingly, the United States will begin a new process with the EU in an effort to reach an agreement that will remedy the conduct that harmed the US aviation industry and workers and will ensure a level playing field for US companies.” 

SWA ‘deeply’ disappointed

Karen Betts, chief executive of the SWA, said the move to retain the tariff was “deeply disappointing”.

She said: “The tariff is inflicting huge damage on the Scotch whisky sector, with exports to the US down 30% since the tariff came into effect and the industry grappling with losses now totalling around £300 million.”

Since the tariffs were introduced, US imports of Scotch whisky have dropped 30% from US$1.01 billion between October 2018 and May 2019 to US$723m between October 2019 and May 2020.

Betts also called for the UK government to “accelerate” discussions on tariff removal during the UK-US trade talks ahead of the upcoming presidential election in November.

She said: “It has taken the UK government a full six months after the UK left the EU to start to tackle tariffs directly with the US government, which seems to us inexplicably slow.”

US imports of liqueurs and cordials from Germany, Ireland, Italy, Spain and the UK are also down by approximately 23% since the tariff was imposed.

No further escalation

In June, the US announced it was considering additional tariffs on gin and vodka from the UK, Germany, France and Spain. However, in its latest move the USTR refrained from placing sanctions on these spirits.

Trade body the Distilled Spirits Council of the US (Discus) said it appreciated the USTR’s decision to not further escalate tariffs and it hoped this would encourage the US and EU to “resolve these longstanding trade disputes”.

The EU’s 25% retaliatory tariff on US products was imposed in July 2018, and caused American whiskey exports to the EU to fall 33%.

In a statement, Discus said: “The EU’s tariff on American whiskey, now in place for over two years, is causing severe damage to US exports and negatively impacting jobs in the US.

“Continuing tariffs on EU beverage alcohol products will only cause additional harm to hospitality businesses in cities and towns across the country that are already suffering, resulting in additional lost US jobs during these uncertain economic times.

The US had considered additional tariffs on gin from the UK, Germany, France and Spain

“The longer these disputes are unresolved, the greater the threat of even more tariffs on our industry.”

Miles Beale, chief executive of trade group the Wine and Spirit Trade Association (WSTA), said: “The news that the US has decided not to escalate tariffs is encouraging. This will come as a huge relief to the growing UK British gin sector which has seen distilleries more than double in number in the last five years.

“This is the first important step in what should prove to be a closer trading relationship, and should provide the necessary space for constructive discussions between the US and UK governments, and for both administrations to work to remove the remaining tariffs against liqueurs, Bourbon and Scotch products – and all wine products affected as well.

“Industry’s voice on both sides of the Atlantic for a free and fair trade agenda is being listened to and that is good for business and good for consumers.”

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