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US and EU end tariffs for five years

The US and EU have agreed to a five-year suspension of tariffs on products such as vodka and Cognac, marking a major breakthrough in the Boeing-Airbus dispute.

The 25% US tariff on Cognac, which came into force in January 2021, has been lifted for five years

In a statement yesterday (15 June), US trade representative ambassador Katherine Tai confirmed the agreement, calling it “significant progress” towards ending the years-long Boeing-Airbus feud.

The trade war between the European Union (EU) and the US is part of a 16-year spat between aircraft manufacturers Airbus and Boeing. In 2019, the US government imposed tariffs on US$7.5 billion worth of EU goods, including single malt Scotch and single malt Irish whiskey, because of the ongoing disagreement.

In October 2020, the World Trade Organization (WTO) sanctioned the EU to impose tariffs on almost US$4bn worth of US products, including a 25% import tax on rum, brandy, vodka and vermouth from the US.

The 25% EU tariff on US rum, brandy and vodka has been suspended, as well as the 25% US tariff on liqueurs and cordials from Germany, Ireland, Italy and Spain, and certain Cognacs and other grape brandies from France and Germany, the latter of which was implemented in January 2021.

In March 2021, the two nations agreed to a mutual four-month suspension of tariffs.

The five-year suspension has been welcomed by a number of trade groups, including the Distilled Spirits Council of the US (Discus).

“The five-year suspension of these tariffs on distilled spirits is happening at a critical time for the US hospitality industry,” said Chris Swonger, president and CEO of Discus. “We appreciate the Biden administration’s work to reset relationships with our trade allies.”

He added that the move will also help the on-trade and craft distillers recover from the pandemic.

Swonger continued: “Today’s announcement is an important building block to reset the bilateral relationship and we urge the administration to build on this positive momentum.”

Trade body Drinks Ireland | Spirits said the tariff suspension was a “positive development for Irish spirits” due to the importance of the US market.

“In 2019, [the US] was the number one market for Irish GI [geographical indication] spirits (Irish whiskey, Irish cream and poitín), with 2,385,800 nine-litre cases of Irish cream exported from Ireland to the US that year,” said Vincent McGovern, head of Drinks Ireland | Spirits.

“Open trade is critical for our sector and we hope that the removal of tariffs will help grow the Irish cream category in that market in the coming years.”

Spirits Europe’s director, Ulrich Adam, called the decision a “major step” that could lead to the conclusion of the dispute.

‘Competitive disadvantage’

But Swonger warned that the EU and UK continue to impose a 25% tariff on American whiskey as part of the steel and aluminium dispute, which has “severely damaged” the industry.

In a joint statement released by the US and the EU, both parties expressed that they “will engage in discussions to allow the resolution of existing differences on measures regarding steel and aluminium before the end of the year”.

In May 2021, the EU decided to temporarily suspend its proposed 50% tariff increase on American whiskey.

Swonger said: “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.”

According to Discus, American whiskey exports to the EU increased from US$502 million in 2008 to US$702m in 2018, up by 40%.

Since the tariffs were imposed in 2018, American whiskey exports to the bloc have fallen by 37%, while the UK recorded a 53% drop.

Swonger added: “We are committed to working with the Biden administration to help secure the removal of the EU and UK’s tariffs on American whiskeys. It is critical to secure a return to the zero-for-zero tariff agreement on distilled spirits, which has been instrumental to our export success and job creation on both sides of the Atlantic since 1997.”

Adam called for the dispute to be “resolved as soon as possible, so that all remaining tariffs on spirits may be removed for good”.

He continued: “This is a must if we want to focus on economic recovery and rebuilding a strong transatlantic alliance based on a positive and ambitious agenda, including a reform of the WTO.”

Last month, the UK government started a six-week consultation on US tariffs, which could remove duties on American whiskey.

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