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Saturday, July 2, 2022

Roll out the barrel

Transatlantic trade tensions have finally eased after the UK lifted a damaging tariff on American whiskey and bourbon. As the head of the world’s thirdlargest premium spirits company explains, there’s much to celebrate. By Eamonn Duff

When Donald Trump launched his trade war with the world, U.S distillers were unwittingly caught in the crossfire of an international row that saw Europe impose a vengeful, 25 percent tariff on American whiskey.

Now, four years after being dragged into that bitter squabble, the levy has finally been lifted in the UK, signalling the return of duty-free trade in spirits across the Atlantic.

For the largest iconic whiskey brands and the many hundreds of smaller craft producers, the breakthrough signals the end of a painful period in which exports tumbled, profits plummeted and livelihoods were lost.

“Distillers across America, large and small, as well as Bourbon consumers in the UK, are celebrating the repeal of these retaliatory tariffs,” said Beam Suntory President and CEO Albert Baladi, whose portfolio includes iconic brands such as Jim Beam and Maker’s Mark.

The 2018 whiskey tariffs had been a direct response from the European Union (which then included the UK) to the Trump administration’s hefty taxes on steel and aluminium.

Baladi (pictured below) added: “When they were imposed four years ago as part of that unrelated trade dispute, the tariffs interrupted more than two decades of duty-free spirits trading that had huge economic benefits for consumers and businesses on both sides of the Atlantic.

 

“In fact, before these retaliatory tariffs were put into place, Bourbon was a great American export success story in the UK. Now that the playing field has again been levelled, we look forward to regaining that momentum in the UK market.

The UK whisky industry is currently booming with exports having risen by almost 20 percent last year to £4.6 billion. More than £820 million of that was bound for the US, making it the biggest food and drink export both Stateside and internationally. By stark contrast, the festering transatlantic dispute between old allies has crippled U.S whiskey exports.

According to data from the Distilled Spirits Council of the United States (DISCUS), American whiskey sales to the UK – its fourth largest market – slipped by more than 40 percent throughout the taxation period with annual sales plummeting from $150 million in 2018 to just $88 million last year.

DISCUS President & CEO Chris Swonger praised the US Government for its “resolve” in bringing an end to the stand-off.

“From day one, the Biden administration made it a priority to reset the relationship with the EU and UK, two of our most important allies and trading partners,” said Swonger, adding: “Distillers throughout the United States are cheering the end of this long tariff nightmare.”

Craft producers, who depend heavily on emerging markets to grow business, were particularly hard hit.

Herman C. Mihalich, Founder and Distiller of  Dad’s Hat Rye Whiskey, said: “This is great news. We’ve been dormant in the UK for three years waiting to reengage. We look forward to getting back in the game.”

Tom Potter, President of the New York Distilling Company, echoed those words. “The UK was our largest export market and we’re excited to return. We appreciate the work of the US and UK trade negotiators who made this possible.”

With the handbrake now off, it’s not just the smaller players who will be eyeing a return to 2017 pre-tax trade, when US whiskey sales were growing exponentially in the UK.

Lawson Whiting, who is President of Jack Daniels maker Brown-Forman, estimates the EU’s penalty tariff on American whiskies was costing his company US $70 million a year in lost sales.

Albert Baladi told FMCG CEO: “Distillers and industry advocates, the Biden administration, Congress and their UK counterparts all fought hard to return to tariff-free spirits trading, and we can finally toast the success of these efforts.

“We at Beam Suntory and the entire American whiskey industry are excited to get back on track and continue to bring exceptional Bourbons and other American whiskies to customers across the UK.”

The tariff resolution also means the UK’s steel and aluminium industries can once again export tariff free up to a specified volume, with its largest trade partner, for the first time since 2018.

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