DISCUS Report Asks USTR to Accelerate Effort to Resolve Trade Issues with EU

Like Cinderella's and her carriage, which was to disappear at midnight, so to will the record exports the U.S distilled spirits industry has achieved this year. But just like Cinderella, there's a way to keep the export machine humming, according to the Distilled Spirits Council of the U.S.: Eliminate retaliatory tariffs imposed on distilled spirits by the European Union of U.S. distilled spirits. Cinderella faced a midnight deadline; if the U.S. and EU can't resolve a dispute about steel and aluminum for aircraft, those tariff will return with a vengence.

"But it's not fair," you might say, the health of a major sector of the U.S. economy should hang upon the ability of diplomats in the U.S. Trade Representative's Office to strike a deal.

Just how critical is this? Since 2002, total American spirits exports have increased by nearly 293% to $2.06 billion, and total American Whiskey exports increased by nearly 242% to $1.3 billion. American Whiskey drives U.S spirits exports, accounting for 62% of total American spirits
exports. Through July 2023, American spirits exports are up 27% and American Whiskey exports are up 54% as compared to the same period in 2022 (January-July).

In 2022, U.S. spirits exports to countries with free trade agreements or zero duties amounted to $1.7 billion, making up 82% of the total exports of U.S. spirits. On the other hand, exports to countries with high tariffs, such as India (150% tariff), Vietnam (45% tariff), and Brazil (20% tariff on all imported distilled spirits, except bulk whiskey, which is 12% tariff) amounted to only $67 million, accounting for just 3% of the total U.S. spirits exports in 2022.

Unfortunately, disputes of steel and aluminum have led to retaliatory tariffs on some U.S. spirits in key export markets. The impact has been dramatic: From 2018 to 2021, there was a 12% decrease in total U.S. spirits exports and a decrease of 18% in total American Whiskey exports.

In 2022, U.S. spirits exports rebounded over pre-tariff levels in 2017 due in large part to the suspension of retaliatory tariffs on a range U.S. spirits exports by the EU and UK,. The chilling effects of the tariffs, supply chain issues, increased shipping costs, and inflation have made it difficult for many craft distillers to regain their footing
in the market. If these retaliatory tariffs were to return, they would reverse the rebound in U.S.spirits exports in 2022 and accelerated through 2023.

In 2022, the top five markets for U.S. distilled spirits exports by value were Canada ($262.5 million, up 8.4%), the Netherlands ($167.2 million, up 28.4%), the U.K. ($158.4 million, up 49.3%), Spain ($145.7 million, up 57.8%), and Australia ($141.2 million, up 39.1%).

The top five markets for American Whiskey exports by value were the Netherlands ($151.2 million, up 95.7%), Australia ($117.1 million, up 39.1%), the U.K. ($112.1 million, up 28.3%), Germany ($103.5 million, up 27.8%), and Japan ($102.4 million, up 7.2%).

At this moment, the only retaliatory tariffs are issued by China and Turkey. But if an agreement reached with the EU by Dec. 31, those countries will once again impose retaliatory tariffs – this time at a rate of 50%, not 25% as was the case previously.

Removal of the retaliatory tariff is DISCUS's No. 1 trade priority.