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Thursday, March 25, 2021

OPINION:

American whiskey distillers always deserve a toast. They’re responsible for creating some of the most delicious liquor in the world, and they’ve kindly shared it for years and years.

Sadly, recent trade news means they may be in more need of a drink than most of us. 


As the pandemic crippled the hospitality industry nationwide, distillers have taken an especially hard hit. Thankfully, easing restrictions mean things are looking up, but, for their largest export markets in the U.K. and EU, burdensome tariffs remain in place. The Biden administration needs to prioritize the removal of these tariffs to help this heritage U.S. industry become what it once was.

Since 2018, whiskey distillers, along with many other producers and exporters, have been caught in the middle of a trade war they should never have been dragged into. America’s most exported spirits — bourbon, Tennessee whiskey and rye whiskey — were targeted and subject to tariffs of 25% by the EU. It pushed up prices, and resulted in lower demand and falling sales.

Recent trade talks brought some good news at the beginning of March, as a range of other 25% tariffs on U.S. spirits including rum, vodka and brandy exported to the EU that were imposed during the trade war were removed. These were met with the elimination of tariffs of the same level on liquors and other specialized drinks coming from Europe into the U.S. 

However, American whiskey, the United States’ largest and most profitable spirits export category, (larger than all others combined) was left out of the negotiations with the EU, the biggest export market for the whiskey. In fact, remaining tariffs on American whiskey are set to double in June 2021, further debilitating an industry already beset by the COVID-19 pandemic. President Biden needs to do something soon.

The tariffs were originally levied as part of an escalating trade war between the U.S. and the EU in part due to a longstanding dispute over subsidies to aircraft manufacture, as well as tariffs on steel and aluminum. Many specialized and traditional goods were levied with tariffs. Iconic products such as Italian wine and French cheeses were targeted as punishment in this war, with American whiskey bearing the brunt on the U.S.-side. As well as producers, consumers on both sides of the Atlantic were caught in the cross-fire as prices were hiked up as a consequence and these goods became harder to come by. 

Even the U.K., freshly single on the heels of Brexit and seeking to forge a stronger U.S.-U.K. trade relationship, hasn’t removed these tariffs. As part of an effort to de-escalate trade tensions with the U.K., the U.S. recently suspended tariffs on Scotch whisky for four months, providing a boon to that industry. However, the favor was not returned, with U.S. steel and aluminum tariffs cited as the U.K.’s reason for holding back. The U.K. is the fourth-largest market for American whiskey but tariffs imposed have caused exports to fall by 53% since their imposition in 2018, and their action alone has a significant impact for American distillers. 

In their statement on the issue, the Distilled Spirits Council of the United States decries the current tariffs as unfair and unsustainable, urging for “a speedy resolution that eliminates all of these debilitating tariffs on spirits for good.” Emphasizing the importance of these export markets, and the effect of the tariffs, their research found that after growing by 40% from 2008 to 2018, American whiskey exports to the EU have since declined by 37% in the two years since the tariffs were introduced.

The council released a further statement upon the announcement of U.S. Trade Representative Katherine Tai’s confirmation, urging her to return to a state of duty-free trade in spirits with both the EU and U.K. by prioritizing the negotiation of the immediate removal of all tariffs before the June increase damages the industry further.

This retaliatory trade war between the U.S. and EU was a Trump-era trademark, but the Trump era is over, and his needless tariffs should have ended with it. As it is with so much trade policy, it’s the everyday producer, worker and consumer who suffers when politicians play this game. America’s whiskey distillers need strong export markets to be able to grow their businesses and employ more people, and to demonstrate to the world the amazing craftsmanship and skill involved in the creation of their spirits. 

Eliminating these tariffs would benefit thousands of Americans and keep a delicious, deeply American tradition alive for years to come. I say: Cheers to that!

• Alice Calder is a PhD candidate in economics at the University of New South Wales and a contributor for Young Voices, writing on issues in trade, the future of work and the intersection of economics and culture. Follow her on Twitter @AliceCalder.


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